Lake Forest Park council committee debates using reserves and strategic fund to lower potential levy; keeps 16% reserve target

LAKE FOREST PARK, Wash. — At a special Committee of the Whole meeting Thursday, Lake Forest Park council members continued a detailed discussion of how to steady the city’s finances and shape messaging ahead of any future levy.

Council members and staff restarted work on a spreadsheet of six-year projections and focused on three questions: whether reserves should be calculated on revenues or expenditures; what reserve percentage to hold; and how to divide one-time balances between a budget stabilization fund and a strategic opportunity fund. Finance Director Vaughn noted the city’s comprehensive financial management policy already targets a 16% reserve and said many municipalities prefer an expenditure-based approach.

“We follow a GFOA best practice at 16%,” Finance Director Vaughn said, referring to the Government Finance Officers Association guidance, and offered to adjust the policy language to reflect the council’s intent.

Why it matters: how the council defines reserves and spends one-time balances will shape whether Lake Forest Park needs to ask voters for a levy and how campaign messaging would be framed. Council members said dedicating money to a stabilization fund can be used to “buy down” a levy rate but also reduces unallocated funds available for other uses.

Deputy Mayor (who opened the meeting) and other members discussed several numeric proposals. One scenario tested by staff showed that a $1,000,000 transfer into a budget stabilization fund could lower a potential levy rate by roughly 3–4 cents in the early years, while larger levy scenarios (staff modeled 12¢, 15¢ and 20¢) produced differing buffers against projected shortfalls. “Based off my early calculations … about 3 or 4¢,” the city administrator said when estimating the buy-down effect of a $1,000,000 contribution.

Councilmember Goldman framed two ways to present the plan to the public: position the funds as addressing a long-term structural deficit, or position them explicitly as a buy-down to reduce the levy impact. Members agreed both narratives are defensible but said the public-facing message must be precise.

Municipal-code limit and policy change: Finance Director Vaughn reminded the council that the Lake Forest Park municipal code currently caps the stabilization fund at 10% of annual expenditures, meaning any larger dedication would require a code or policy change. Vaughn said staff can draft updated language to match council intent.

Fund allocation and strategic purchases: Councilors discussed using strategic opportunity monies to invest in projects intended to grow the tax base — for example, acquiring property that could house regional services — but members noted such purchases would remove property from the tax rolls and carry operational questions. The idea was described as preliminary.

Assumptions and risks: Staff clarified that the projections assume full current staffing levels; unanticipated staffing increases or higher-than-expected inflation would narrow any projected buffers. Councilmembers emphasized keeping some unallocated balance to handle large invoices or unforeseen costs.

Decisions and next steps: Members signaled consensus to keep the reserve target at 16% and to re-base it on expenditures (or revenues, whichever produces the higher reserve), and asked staff to draft a formal policy update. The city administrator agreed to distribute an updated packet that includes the spreadsheet scenarios discussed so council can test specific allocation combinations ahead of future levy conversations.

The committee adjourned and will resume the budget strategies discussion at a future meeting when staff can provide updated projections and a draft policy amendment.