Kenmore reviews six-year forecast and revenue options; staff says 2027 measure would need about $2.4M

At a special study session, City Manager Terry Kilgore and Finance and Administration Director Melinda Merrill presented a six-year financial forecast that projects a growing structural gap and urged the City Council to consider revenue and program options to preserve reserve targets.

"If we implemented a new revenue measure in 2027, it would need to generate for us $2,400,000," Kilgore told the council as staff described four forecasting scenarios that combine regular and high expense escalation with recession and no-recession variants. Staff emphasized the models are conceptual and that no motions could be taken during the special meeting.

The forecast shows general‑fund biennial revenues of about $35.2 million against projected biennial expenses of roughly $38.1 million, with property taxes ($12.5 million) and public safety costs seen as the largest drivers. Melinda Merrill said the models put the earliest “lines crossing” — the point at which fund balance would fall below the 20% reserve guideline — as late 2029 in the best case and as early as late 2028 in the worst-case scenario.

Merrill said staff has not included CAPE program revenue in the general‑fund forecast because court costs and state legislation remain uncertain. She told the council CAPE generated about $3.5 million gross in 2025 but that net figures will depend on court cost actuals expected in June or July.

Councilmembers pressed staff on specific options for closing the gap. Staff outlined three categories of levers: councilmanic revenue choices (those the council can enact), voter‑approved property‑tax measures and programmatic changes. Examples discussed included:

- A city-level 0.1% public-safety sales tax, which staff estimated could generate about $425,000 annually if implemented; the city can enact a 0.1% rate without a voter measure if state approvals are completed.

- A Metropolitan Park District (MPD) to raise revenue for parks operations and capital projects; staff showed how a 40¢ per $1,000 example would scale and noted MPDs can be structured with various caps.

- A levy lid lift (public‑safety-focused) or hybrid levy that could be structured as a one‑year, six‑year (renewable) or ongoing increase; staff gave examples showing how per‑homeowner impacts rise the longer the council waits to act.

Kilgore framed the trade‑offs in timing: "If we act earlier, we ask for less, but we ask sooner," he said, noting an ask of $2.4 million in 2027 would grow substantially if the council delayed.

Councilmembers also discussed non‑revenue levers. Staff reiterated the city is lean compared with peers (about 2.46 FTE per capita) and suggested the council could examine interlocal agreements, service‑level budgeting classifications (core/basic/enhanced) and other service‑delivery models — including renegotiating elements of the King County Sheriff's Office contract — but staff offered no immediate personnel reductions.

Several councilmembers asked staff to provide additional analyses at the upcoming retreat and in March–April work sessions, including: net CAPE projections when court actuals arrive, comparative voter‑measure mechanics (MPD vs levy lid lift), and a more detailed breakout of core/basic/enhanced service costs.

Kilgore said the presentation and supporting slides will be posted publicly and that staff will return with more detailed analyses for decisions the council may wish to take at future meetings or on the ballot.

Next procedural steps: staff will post the full presentation, return to the council in March and April with deeper analysis, and the council will discuss possible ballot timing and councilmanic actions at the March retreat.