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Finance director flags $1.6M general fund gap, outlines capital timeline and equipment costs
Summary
Finance Director Matt Mordnick told council Jan. 20 that the city faces a projected operating gap of about $1.6 million in the general fund for the 2027–28 biennium, outlined a six‑year capital program and warned that vehicle and equipment replacement costs — including a Type 2 fire engine estimated at $750,000–$800,000 — will pressure future budgets.
Finance Director Matt Mordnick and Deputy Finance Director Lawan Tuttle presented an overview of Mercer Island's budget framework on Tuesday, explaining how the city separates operating and capital budgets, how restricted and unrestricted revenues are managed under fund accounting, and what staff see as the important budget issues for 2026 and beyond.
Mordnick said the city is in the second year of its 2025–26 biennium and that staff are already developing the 2027–28 biennial budget. He told the council to expect an emerging operating gap: "We have an eye on the general fund experiencing a funding gap of about $1,600,000 and the youth family services fund of $800,000," Mordnick said. He framed that shortfall amid substantial capital work — some projects he described as "generational" investments — and recommended returning to council early and often with strategies to address the gap.
The presentation described the capital improvement program (a six‑year view) and noted that the city recently moved more than $30 million in carryforward resources into the 2025–26 biennium to support ongoing capital work. Mordnick also highlighted an equipment replacement example: a mid‑size Type 2 fire engine that the city expects to replace in 2026 at an estimated cost between $750,000 and $800,000. The fleet and equipment rental fund will be reviewed to ensure replacement schedules and internal user charges keep that fund solvent.
Council members pressed for clarity about timing and whether the apparent growth in budgeted expenditures reflected one‑time carryforwards or structural increases. Mordnick and staff explained that the 2025–26 numbers include carryforwards and that staff will provide a more precise accounting in April and May as actual 2025 expenditures are closed out. The presentation also outlined a timeline for community engagement, transportation program updates and the development and adoption of the 2027–28 budget, with a planned adoption in December 2026.
The briefing did not include formal council action; it set expectations for future budget workshops and directed staff to provide additional analyses about revenues, the CIP and the fleet fund.
