Anacortes council hears finance briefing; staff warns planned draw on reserves of $2.6 million

City Finance staff presented an overview of the city’s accounting system and year-end fund results at the Anacortes City Council meeting on March 3, 2025, and said the 2025 budget relies on about $2,600,000 in cash reserves to balance the general fund.

The presentation explained why the city uses fund accounting and how governmental funds differ from enterprise funds. It also walked council through year-end cash positions by fund, projected 2025 fund-balance uses and several capital and recovery items that shaped reserves and spending plans.

The finance presenter emphasized the required accounting framework and the practical effect on budgeting. “It’s not efficient. It is an inefficient means of accounting,” the presenter said, adding that the system, mandated by state rules and the BARS manual, nevertheless “provides more accountability.” He told the council that, under current revenue and expenditure assumptions, “we are relying on 2,600,000.0 in cash reserves to balance out the general fund.”

Why it matters: fund accounting determines when and how the city recognizes revenues and reports long‑term obligations. Under the system the presenter described, many smaller funds (parks, cemetery, library) rely heavily on property-tax allocations and thus have little flexibility if overall municipal revenues do not grow.

Key figures and items discussed - General fund: staff projected use of roughly $2.6 million from reserves in the 2025 budget under current assumptions. - Firemen’s pension (trust) fund: roughly $177,000 in cash; receives roughly $24,000 per year in fire insurance premium tax and pays roughly the same amount to two pension beneficiaries. - Water fund: roughly $6,000,000 banked in cash reserves; spending profiles vary with multi‑year capital projects. - Sewer fund: staffing and capital, including an outfall project, drove nearly $5,000,000 of reserve use in recent years. - ER&R (equipment replacement/internal service) fund: $533,000 in year‑end cash; planned to bank $1,700,000 in 2025 related to capital equipment timing. - Impact fees: street impact fee cash about $6,057,000; these must be spent on eligible projects within 10 years of collection.

Council members and staff discussed steps the city is taking to manage reserves if revenues stay flat: holding vacant positions, phasing projects, and monitoring revenues closely through the year. Councilmembers flagged parks, cemetery and library funds as the most vulnerable because those budgets are highly dependent on property tax revenues, which are limited by state rules.

Also discussed were several large one‑time items that affect reserves: the city’s fiber buildout financed in part with bonding and prior reserves, an anticipated FEMA alternative reimbursement for a damaged trail the city estimates at about $2,500,000, and sewer outfall construction costs that have driven recent reserve use. Staff said FEMA and grant communications have been positive but that awards and drawdowns remain subject to review.

What comes next: staff said they will continue active monitoring and bring adjustments to council if revenues fall short or capital spending plans change. Council scheduled an upcoming session with the county assessor’s office to review property-tax issues and noted there will be further budget monitoring during the year.

Ending: The council received the briefing as a discussion item; no formal vote was required or taken on the budget figures at the March 3 meeting.