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Council reviews $111M capital-improvement program, agrees to form finance ad hoc committee to weigh reprioritization
Summary
City staff briefed the council on the city's six-year, $111 million CIP and the constraints of restricted revenues (REET and utility-rate legal limits). Council agreed to convene a finance ad hoc committee to develop project-prioritization scenarios and consider whether to redirect REET or utility contributions to facilities.
Finance Director Matt Mornick and Chief of Operations Jason Kitner presented a high-level overview of Mercer Island's capital improvement program (CIP) on Feb. 3, describing near-term pressures, funding constraints and trade-offs following a failed November 2025 ballot measure to finance a new public-safety and maintenance facility.
CIP snapshot: staff said the amended 2025—26 biennial budget includes roughly $111 million of CIP work across 142 active projects covering public buildings, streets/pedestrian facilities, water, sewer, stormwater and parks. Kitner highlighted major upcoming projects including a water-supply pipeline and AC main replacements, park waterfront improvements, community-center HVAC replacement and sewer pump-station work.
Legal constraints and revenue sources: Mornick explained state law restricts how certain revenues may be used. He described the two halves of the real-estate-excise-tax (REET) 0.5% split: REET 1 may be used on parks, streets and facilities; REET 2 may be used on parks, streets and utilities but not facilities. He also explained the legal firewall that separates utility rate funds from general-purpose spending and noted that if utility revenues were used for building projects, the city would need a clear nexus and proportional allocation for the portion of facility use tied to utility operations.
Prioritization and trade-offs: staff urged council to consider project scoring and trade-offs (life-safety/compliance, service-interruption risk, end-of-life maintenance, community amenities, and grant-risk) and recommended forming a finance ad hoc committee to work with staff to develop alternative scenarios for reprioritizing projects and reallocating restricted funds where legally permissible.
Council decision: councilmembers broadly supported forming a finance ad hoc committee and suggested staff prepare project-level analysis and a scoring rubric that flags legal requirements, life-safety risk, potential cost escalation if postponed, projects already in flight, and grant risks. Staff said they will convene the committee and return with options and community-engagement plans.
Why it matters: the city faces multiple sizable capital needs across aging infrastructure and facilities. Because many revenue streams are legally restricted, the council must balance near-term maintenance and statutory constraints while engaging the public about potential reallocation of REET or rate-funded contributions.
Next steps: staff will prepare project-level analyses and options for the ad hoc committee; the committee will meet with staff and report back to council in March and into the spring to inform the 2027—28 biennial budget.
