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Anacortes council weighs REET shortfall as finance director previews budget and CFP amendments
Summary
At a March 2 first reading, Finance Director Steve Hoagland outlined REET projections and proposed 2026 budget and Capital Facilities Plan amendments, prompting council questions about grants, project timing and potential cuts before a public hearing in two weeks.
Finance Director Steve Hoagland told the Anacortes City Council on March 2 that the city will hold a first reading of Ordinance 50-23, a 2026 budget amendment, and a companion Capital Facilities Plan amendment and that final action — including a public hearing — is scheduled in two weeks. "This is a first read of both of these items," Hoagland said, adding he will return for final action after the public comment period.
Hoagland walked council through the city’s real estate excise tax (REET) picture, saying staff used year-to-date comparisons to reach a $1.4 million REET revenue projection for 2026 and noting a $3.3 million ending REET balance carried forward from 2025. He warned that adding projects into the CFP for 2026 — including three pedestrian-crossing projects and a Fire Station 1 remodel — shifts the multi-year plan and can drive projected deficits later in the CFP horizon.
Council members pressed for detail on what drives REET and how recent grant awards affect the city’s obligations. One council member asked Hoagland to "remind us of what those things are" that feed the REET calculation; Hoagland explained REET comes from home sales transactions and flows to the city after county processing. He also acknowledged a packet reissuance after a miscommunication: a crossing project initially shown as all-REET was later reflected with $164,000 in grant funding, reducing the city match.
Several council members suggested options to reduce near-term risk, including pulling lower-priority projects before staff proceeds with bidding. Hoagland said adjustments can be made ahead of the public hearing: "If council wanted to make adjustments at that point, we can make those revisions," he said. The mayor and council emphasized that staff should avoid preparing bids for projects the city cannot fund.
Hoagland and council noted that some projects have already been bid and that the city will continue to explore grant opportunities — and that the South Commercial Avenue project will be revisited to confirm a funding plan if a state grant is awarded. The CFP amendment and budget ordinance remain at first reading; the council set a public comment period and expects to take formal action after the scheduled public hearing in two weeks.
