Everett staff project $7.9 million 2026 deficit, propose one‑time fixes and service reductions

Everett finance staff told the City Council Budget Committee on Sept. 17 that the city is projecting a $7,900,000 budget deficit for its 2026 general government budget and presented a package of one‑time and ongoing balancing measures to close the gap.

"As of August 2025, we're projecting a budget deficit of $7,900,000 in 2026," said Jamie Lee Graves, assistant finance director, during the committee presentation. The Office of Finance reported year‑to‑date revenues through July 31 exceeded projections by $2,147,681 (2.3%), driven largely by business & occupation tax receipts and grant receipts, while year‑to‑date expenditures were about $1,738,437 (1.8%) under budget.

Finance staff outlined a mix of revenue and expenditure actions that would eliminate the projected shortfall. Major elements include continuing the suspension of general government contributions to the city’s LEOFF 1 (Law Enforcement Officers' and Fire Fighters' Retirement System) police and fire pension funds carried forward from the 2025 budget; a $1,000,000 reduction in the general fund contribution to the city street overlay program (leaving a projected $2,400,000 for overlay work in 2026 funded by car tab fee revenues, property tax, CIP and real estate excise tax); elimination of the standard 2% growth in department maintenance and operations budgets (saving $213,000); and continued use of senior center reserve funds to pay the Volunteers of America contract ($200,000 in 2026, with a final contractual payment of $150,000 scheduled for 2027).

On the revenue side, staff proposed several transfers and reallocations: continuing to use lodging tax revenues to support city‑led events and the Everett Performing Arts Center management contract (up to $334,957); applying a SAMHSA congressional grant extension (approximately $1,068,150) to the city's alternative crisis response program; transferring $1,067,725 from Criminal Justice Fund 156 (the 0.1% criminal justice sales tax fund) to support the police department's violent crimes unit (six full‑time employees); and reallocating unspent local COVID relief funds.

"With all of these balancing measures on both the revenue and expenditure side, we closed the projected $7,900,000 deficit for the 2026 budget," Heidi Berlantes, finance director, said during the presentation.

City staff reported an estimated $2,296,117 in unallocated and unspent local COVID relief funds as of 2025. Proposed reallocations described in the presentation would shift previously reserved COVID funds to other priorities: $2,000,000 previously set aside for a daytime service access facility (staff said the city had been unable to secure an operational partner and no ongoing operating funds were available), $256,139 for the Clean Everett program (to preserve annual cleanup and dump fee support in 2026–27), and $300,000 for tree planting that staff said is no longer required after the parks department secured a separate federal grant of $7,967,493 passed through from the Snohomish Conservation District.

Council members questioned the reliance on one‑time federal COVID relief and other nonrecurring sources to balance recurring expenditures. "I would like to see one more hurrah with money, for projects that maybe the city's had their eye on," Councilor Ryan said, urging consideration of community investments. Mayor Chooley noted the fiscal tradeoff, saying the proposed reallocation uses "nearly $5,000,000 from COVID relief that we're utilizing one time to offset our deficit," and asked how the city will address recurring shortfalls once those funds are exhausted.

Councilors also pressed for additional detail on specific items: the pension actuarial work (staff said the most recent valuation was completed for 2025 and that the analysis targets full funding by 2030, with options to extend contributions to 2035 or 2040), the composition of B&O tax sectors (staff said manufacturing is the largest sector), and how many lane miles or square footage the reduced street overlay funding would cover (staff said they would refer that operational question to Public Works Director Ryan Sass).

Staff emphasized that several balancing measures are one‑time solutions and will not resolve structural deficits in out years. The projection for 2027 improves modestly under the proposed package — the city reported the 2027 deficit was reduced by $1.2 million compared with an August 2025 forecast — but staff and councilors acknowledged further work will be required to produce ongoing solutions.

Technical and administrative notes in the presentation included: sales tax collections are reported with a two‑month lag; business & occupation receipts are received quarterly in January, April, July and October; and COPS (Community Oriented Policing Services) grant payments that fund law enforcement positions currently extend through 2026 with possible extensions still under consideration.

The committee did not take a formal vote during this session. Staff concluded the presentation and invited additional council questions; councilors indicated they will continue budget deliberations and consider policy and revenue options in coming meetings.