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Finance staff: Mercer Island Q1 2026 revenues on track but REET down 12.5%, REET volatility limits capital spending
Summary
Finance Director Matt Mor and Financial Analyst Ben Schumacher told council that most funds are tracking to seasonal expectations, utility funds benefited from a one-time reimbursement from Seattle Public Utilities and interest earnings, but property sales were down 12.5% in Q1, reducing real estate excise tax (REET) revenue available for capital projects.
Finance Director Matt Mor introduced a short slide review of the city’s financial performance through the first quarter of 2026 at the June 16 council meeting, and Financial Analyst Ben Schumacher delivered the financial details.
Schumacher told the council that "property sales are down 12.5%" in the first quarter of 2026, and staff flagged that REET (real estate excise tax) revenue — which state law restricts to paying for public infrastructure — remains volatile and is an important funding source for the capital improvement program. He also reported a one-time reimbursement from Seattle Public Utilities to the city’s utility funds for an overcharge and stronger-than-expected interest earnings, which temporarily improved utility fund results.
Staff said all operating funds (general fund, youth and family services fund, development services fund, and utility funds) are performing within historical seasonal expectations through Q1, with some revenues below the 25%-of-year mark because of timing (for example, property tax collections occur later in the year). Business and occupation tax and sales tax tracking reflect normal seasonality, staff said.
Why it matters: staff said the Q1 results are feeding into work to build the 2027–2028 preliminary budget and the six-year capital improvement program. Because REET is down and inherently volatile, staff said they will prioritize projects and return in the fall with recommendations for the two-year capital program and any necessary budget adjustments.
Councilmember Becker asked whether the recently passed collective bargaining agreement would require an immediate budget amendment; staff replied that the second-quarter financial status update in September will include a budget-amending ordinance listing changes between May 5 and September and that staff will provide exact numbers then.
No formal council action on the budget was taken at the June 16 meeting; staff will return with budget and capital recommendations this fall.
