Anacortes council holds required public hearing on 2026 revenue; discusses 1% levy, utility tax and rate options

Acting Chair Council Member Young opened and closed a statutorily required public hearing Oct. 6 on the City of Anacortes’ proposed 2026 revenue sources, during which city finance staff reviewed revenue projections, property tax mechanics and a set of options to close projected gaps in the general fund.

The city’s finance manager summarized the revenue picture and said the proposed draft budget includes a 1% increase to the city property tax levy and described how that levy interacts with changing assessments. Council also heard from one resident, Pat Gardner of Anacortes, who urged the council to disclose the combined effect of market revaluations and levy increases on residents’ total tax bills.

City finance manager presentation and key numbers

The finance presentation described total draft 2026 revenues of about $111,588,000 and identified property tax as the single largest local tax stream in the draft budget, budgeted at $8,500,000. Staff explained that a council-authorized 1% increase on the existing levy would, at the current levy level, equal roughly $85,000 in additional revenue and that the council controls only the dollar amount of the levy request (the levy total), not the millage rate that results from changing assessed values.

Using staff examples, a home with a $750,000 assessed value would face a city portion of the property tax bill of about $983.94; a 1% increase on the city levy portion would add about $9.84 a year to that example household’s city levy. The finance presenter also said the 1% levy is routinely used to blunt erosion in purchasing power from inflation and that new construction amounts are added separately to the levy request when submitted to the county.

Utility tax and other revenue options

Finance staff outlined additional options to close a projected shortfall between department requests and available revenues. Council discussed a possible 2% utility tax on the city’s water, sewer and storm utilities, which staff estimated would generate roughly $612,000 for the general fund; staff clarified that the estimate excludes water sold to wholesale purveyors. Council members asked whether that estimate included wholesale customers and staff replied it did not.

Staff also presented possible direct rate adjustments to utilities to shore up specific funds. The presentation showed a model in which a $5-per-month increase to storm system charges would generate about $410,000 in 2026, and a sewer rate scenario (a 6% increase above the baseline CPI adjustment) was projected to produce roughly $540,000. Staff said the 6% sewer scenario translates in their example to “about $55 a month” for a typical bill in the worked example provided to council.

Sales tax, REET and shared-state revenues

Staff reviewed other major local revenue streams: sales tax (projected conservatively with a 2.5% inflator based on August receipts and historical patterns), real estate excise tax (REET) and shared-state revenues (liquor profits/excise, criminal justice distributions and motor vehicle fuel tax). The presentation also noted that REET receipts have not returned to earlier peak growth rates and that some capital facilities projects funded from REET may need to be deferred or paced across later years unless revenue improves.

Public comment and council questions

Pat Gardner, an Anacortes resident, asked that the council be transparent about the combined effect of automatic valuation-driven increases, the proposed levy increase and other cost pressures on households. “Citizens deserve full disclosure about how much their tax burden will rise, not just the portion labeled as levy increase,” Gardner told council during the public hearing.

Council members pressed staff on several implementation details: how the levy request is presented to the county, whether wholesale water customers are included in utility-tax models, and how the city plans to sequence capital spending if revenue sources are weaker than projected. Several council members and staff also discussed that the 1% levy authority and the addition of new construction dollars are the principal ways the city raises property-tax revenue under current state law.

Next steps

Staff closed the hearing at the end of the meeting and reminded the public that the budget process remains open for comment at subsequent budget meetings. Council did not adopt the levy or any rate changes at the Oct. 6 meeting; staff will return with budget detail, proposed ordinance or resolution language if the council decides to take action later in the budget cycle.

Ending

The city provided examples and modeling during the statutorily required hearing; council members said more detailed, itemized options and potential grant or external funding opportunities will be discussed as staff brings refined budget proposals back to the council in coming weeks.