City releases FY24 year‑end results, but forecast shows structural gap by 2027

Mercer Island’s finance director on May 20 told the City Council that the city ended fiscal 2024 with a general fund balance of $12.3 million, of which $7.0 million is reserved and $5.3 million remained available at year end. Staff credited higher‑than‑expected sales‑tax receipts and a resurgence in interest earnings for the one‑time gains.

Finance Director Matt Mornick presented the 2024 year‑end financial status and an updated May 2025 forecast that models three scenarios (favorable, most probable, unfavorable). The most probable scenario assumes near‑term revenue strength but projects structural pressures beginning in 2027 that will draw down available fund balance and could produce multi‑million‑dollar operating shortfalls in later years. Staff told council they would return this fall with mid‑biennial budget analysis and long‑term financial strategies.

Key 2024 figures cited by staff included a $12.3 million general fund fund balance (reserves $7.0 million; available $5.3 million), $7.2 million of American Rescue Plan Act (ARPA) funds invested in local programs, and ongoing underperformance of real estate excise tax receipts (REET). Staff said the city set aside $4.1 million of one‑time 2024 resources into a municipal facility replacement fund established after the city hall closure. The contingency (rainy‑day) balance presented in the update was reported at $94.9 million and was noted to exceed the target funding level; staff flagged that any change to contingency requires council action.

The May forecast also updated the Youth and Family Services (YFS) fund. Revenue from the city thrift shop was reduced by roughly $340,000 in each of 2025 and 2026 to reflect a temporary closure for building renovations earlier this year. Updated projections for YFS showed the fund’s operating balance drawn down fully by 2026 and an $800,000 operating deficit projected in 2027 under current assumptions.

Council adopted Ordinance No. 25‑10 to amend the 2025‑26 biennial budget as presented in the agenda bill. The roll‑call vote was unanimous. Mornick and staff emphasized that using one‑time fund balance now allows time to develop long‑term measures (rate adjustments, reserves policy, program changes) and that staff will return with refined options in October and the mid‑biennial process.

Councilmembers asked for the city’s full balance‑sheet statements (to be provided when 2024 financial statements are completed this month), clarification on ARPA uses, and more detail on assumptions behind the forecast. Staff said all ARPA funds were invested in Mercer Island programs and that they would monitor REET and capital cash flows closely.