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Council hears options to restart Lynnwood’s economic development infrastructure fund, staff recommends waiting for finance director
Summary
Staff outlined how the Economic Development Infrastructure Fund (EDIF) worked, past revenues and projects, and presented threshold options for future transfers; staff recommended delaying reinstatement until the city’s finance director can advise.
City staff briefed the Lynnwood City Council on June 8 about options for reinstating the Economic Development Infrastructure Fund (EDIF), a mechanism first adopted in policy in 2012 and implemented in 2015 to allocate construction-related revenues to one-time infrastructure investments.
Public Works Director Jared Bond and DBS Director Ben Walters reviewed the fund’s history: EDIF collected construction-related sales-tax revenue above a set threshold (originally $1,000,000) and a portion of large-project permit fees; the fund generated roughly $9.4 million over four years and at one point held just over $10 million. Money from the fund paid for transportation projects, the South Lynnwood improvements, some parks and city-facility projects, and gap funding that helped the city compete for grants.
Staff presented alternatives for setting future thresholds (examples shown at $1.0M, $1.5M, $2.0M, $2.5M, and $3.0M) and estimated corresponding average annual transfers under each approach. Directors noted trade-offs: lower thresholds send more revenue to EDIF but reduce general-fund flexibility; higher thresholds preserve general-fund capacity but yield less EDIF funding and create years with little or no transfer. Staff emphasized the cyclical nature of construction sales tax and discussed options for indexing the threshold (annual finance-director adjustments, multi-year averages, or scheduled council review).
On implementation details, staff recommended restricting EDIF to construction sales tax in a future iteration and removing the permit-fee component because large permit-fee revenue is often needed to fund permit services. They also proposed that, if reinstated, transfers would be calculated after year-end and made during a budget amendment cycle.
Given current fiscal pressures, recent increases in the city’s debt service and ongoing budget uncertainty since 2020, staff recommended waiting on a formal reinstatement until the finance director is in place and can provide analysis. Councilmembers asked about measuring EDIF’s historical return on investment and how to protect the fund from being repurposed by future councils; staff said some EDIF expenditures (for example, Meadowdale Playfield improvements and the South Lynnwood project) supported hotel and retail activity and enabled grant leverage, but a full ROI analysis would require consultant support.
Council responses were mixed but broadly supportive of a cautious approach: several members endorsed starting small and building periodic council reviews into the policy to reduce the risk of future rollbacks. One member suggested tying other sales-tax categories (for example, motor-vehicle sales tax) to specific capital uses such as roads. Staff noted that reinstituting EDIF would be a multi-step budget decision and reiterated the recommendation to involve the finance director before formalizing a plan.
No formal council vote to reinstate EDIF occurred at the meeting; staff framed the briefing as informational and recommended more work and financial analysis before any action.
Representative staff references: staff repeatedly cited the original EDIF policy (2012) and the program’s 2015 implementation; the presentation included historical revenue figures and examples of funded projects. The council asked for follow-up analysis tied to the city’s capital projects and forecasted fiscal health.
