City finance staff presented an updated mid‑biennium financial forecast on Nov. 5 that shows revenues remaining positive in 2025–26 but at a smaller surplus than in recent years, and a projected ongoing gap of roughly $9.5 million for the 2027–28 biennium if no policy changes are made.

Kevin Pestring, the city’s financial planning manager, told council the city is seeing “personnel savings” and higher investment interest in 2025, but that retail sales tax, revenue‑generating regulatory license (RGRL) fees and construction activity have slowed compared with the extraordinary surpluses that helped pay for one‑time investments in prior cycles. "Starting with retail sales tax ... retail sales tax is relatively flat from 2024," Pestring said, noting a regional pattern of flat or below‑budget sales tax collections.

Key takeaways and drivers:
- Personnel and retirement contribution savings: Staff expects personnel expenditures to be roughly $2.8 million under budget in 2025, driven by vacancies and lower employer contribution rates for PERS/PERS‑type plans. Pestring recommended considering setting aside some of those savings for future cost‑of‑living adjustments.
- Revenues: Retail sales tax is flat, utility taxes are flattening, RGRL revenue is improving toward expectations but remains uncertain, and investment interest earned more than budgeted in 2025 but is expected to normalize in 2026 if interest rates decline.
- Outlook: Staff presented a conservative forecast that reduces the 2027–28 structural gap from an earlier $12 million estimate to about $9.5 million, emphasizing uncertainty from federal policy and tariff activity.

Recommended mid‑biennium adjustments and service packages: Staff presented roughly $6 million in proposed adjustments (largely one‑time) and recommended service packages across council priorities: emergency food rapid‑response funding ($100,000 fiscal note discussed separately), limited‑term program extensions in human services and building departments, downtown safety camera planning funds, a heavy rescue trailer and brush truck for Fire, a supplemental position for fire prevention, athletics scheduling software, and park land acquisitions funded in part by new King County Conservation Futures awards.

Capital program changes: Staff also summarized CIP changes, including adding or adjusting funded project budgets, moving some projects between funded and unfunded lists, and recognizing external grants. Notable items included increased funding for the Silver Spurs regional stormwater facility and updated cost estimates for Goat Hill wall safety improvements and NE 68th Street pedestrian and bicycle safety design work.

Council direction and next steps: Council questions focused on the magnitude of the 2027–28 gap, timing for public input on proposed service packages, and options for closing long‑term gaps in the 2027–28 budget. Staff said the council would receive an additional business item on Nov. 18 for follow‑up and would adopt mid‑biennium adjustments on Dec. 9. Pestring emphasized the cautious approach to long‑term forecasts and that staff will return with options and tradeoffs during 2026 budget planning processes.

What it does not do: The mid‑biennium update includes recommended service packages but does not adopt ongoing policy changes that would address the 2027–28 structural gap; those major decisions are expected in future budget cycles.

Who spoke: Council members asked staff for more detail on fund balances, working capital, the mechanics of potential grants and public‑private coordination, and whether some proposed investments—such as downtown security cameras—should be piloted or further analyzed for privacy and public‑records implications before permanent installations were purchased.