Lake Stevens council hears updated forecasts, weighing cuts and a public‑safety sales tax amid rising legal costs

Lake Stevens — City staff on Tuesday laid out updated budget forecasts that show only modest gains in property‑tax receipts and weaker sales‑tax growth, leaving the city facing a general fund shortfall that could push operating reserves into the red within the next two years.

Barb (staff member) told council members the assessor’s updated property‑tax numbers increased the city’s estimate by about $30,000 — “about half a percent” — while sales‑tax growth assumptions were reduced from earlier projections to roughly 2.7% for 2025 and 2% for 2026. She said investment‑income assumptions have also been lowered, producing an estimated $500,000 decline in interest revenue across the city for 2026.

The presentation focused on three pressure points: revenues (property, sales and investment income), rising legal costs and personnel expenses, and the city’s ability to deliver capital projects. Barb highlighted a roughly 98% increase in public‑defender costs and signaled prosecutors may request additional increases, a jump that staff said is contributing to the budget gap that the council must address.

Why it matters

City leaders must decide whether to close the gap through spending reductions, by shifting one‑time funds into ongoing uses, or by pursuing new revenue. Council members repeatedly pushed staff for quantified scenarios that show the service‑level impacts of specific percentage or dollar‑value cuts, saying voters deserve clear, comparable choices ahead of public hearings.

What staff proposed and what council discussed

• Reallocations and one‑time moves: Staff proposed reallocating pandemic recovery and other one‑time funds (staff cited roughly $800,000 from previously allocated park projects and about $300,000 of other unencumbered pandemic funds) back to the general fund as a short‑term stopgap. They also described administrative‑cost reallocation and greater chargebacks to permit funds as recurring‑revenue options.

• Personnel and benefits: Eleven positions that had been on hold were reviewed; staff removed several facility‑maintenance positions from the 2026 budget and suggested contracting janitorial services and adding a half‑time parks FTE for weekend coverage. Barb presented illustrative benefit‑share scenarios — for example, a 10% employee/20% dependent contribution scenario that staff estimated could be about $200,000 annually — and cautioned that cutting compensation or training could hurt retention.

• Public safety sales tax: Council discussed a proposed 0.1% public‑safety sales tax that staff said could generate roughly $800,000 for the general fund and be used to pay sharply higher public‑defender costs and other criminal‑justice expenses. Staff noted statutory timing constraints for placing such a measure on the ballot and said a presentation on the sales‑tax option would be made at the next workshop.

• Cost recoupment and fees: Several council members urged aggressive recovery of external costs (annexation, consultant and permit‑related fees) and review of fees that the city currently does not fully recoup. Staff cautioned the city cannot price services to produce a profit and warned about the implementation costs of billing new services.

• Capital delivery limits: Aaron (staff member) walked the council through the draft capital improvement plan for 2026–2031: 44 projects across six years with roughly $24 million in planned expenditures for 2026 and about $14 million in currently committed grants across the six‑year horizon. He said the city lacks project‑delivery capacity — delivering approximately 3,300 project management hours (~2 FTE) in the last period versus an estimated need of about 9,000 hours (~5–6 FTE) to fully execute the program — and recommended examining contracting or other delivery alternatives.

Notable figures and local examples

• Property‑tax update: staff reported an increase of “about $30,000.” • New construction estimate: staff cited roughly $70,000 (estimate) in new construction value not included in the 1% levy calculation. • Interest income: staff built a ~10% decrease in investment interest into the 2026 forecast (~$500,000 across the city). • Public‑defender costs: staff said the cost is rising sharply (presented as a roughly 98% increase in the packet) and that the public‑safety sales tax could help cover that expense. • Pandemic recovery funds: staff described moving roughly $800,000 of previously allocated pandemic recovery dollars back into the general fund as a one‑time stopgap.

Capital priorities and examples

Aaron highlighted priority 2026 capital projects including sidewalk and multiuse‑path improvements on North Lakeshore Drive, sewer/main and infrastructure work on 130 First Avenue NE, Main Street wrap‑up and several park projects (Frontier Heights Phase 2, Eagle Ridge Phase 2 and Cedarwood feasibility). He said many grants are front‑loaded but the city’s main constraint is staff capacity to deliver projects on schedule.

Council feedback and next steps

Council members repeatedly asked for concrete, numbers‑based scenarios that show the service impacts of particular reductions (for example, 10% general‑fund reductions) and for comparisons that show how other cities are funding public‑safety compensation while remaining balanced. Staff said the compensation‑market study scenarios will return to council on the 14th and the mayor’s recommended operating and capital budget will be presented on the 21st, with public hearings to follow.

The meeting ended after staff transitioned to more detailed CIP slides and a member called for adjournment; the transcript provided ends with a motion to adjourn and recorded opposition without a formal, recorded vote in the provided segments.

Quotes from the meeting

• Barb (staff member): “We updated values, and it increased our estimates about $30,000 so about half a percent.” • Barb (staff member): “We do have an overall 10% decrease in interest in [the] forecast for 2026.” • Aaron (staff member): “The challenge is not the funding in capital project delivery. It’s the people to do the thing.”

What to watch next

Staff will return with compensation study scenarios on the 14th, the mayor’s proposed operating and capital budgets on the 21st, and a dedicated presentation on the public‑safety sales tax at the next workshop. Council requested boxed scenarios that quantify service‑level impacts so the public can evaluate tradeoffs before hearings.