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Budget and Finance Committee

BEL-BFC-2025-03-10 March 10, 2025 Budget & Finance Committee City of Bellingham 55 min
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The Budget and Finance Committee received a sobering year-end financial report that revealed Bellingham ending 2024 in its emergency reserves with only $361,500 remaining in economic reserves. Finance Director Andy Asbjornsen presented the 2024 financial review showing the city collected $403 million in revenues against $420 million in expenses across all funds, creating a $16.5 million shortfall citywide. The most concerning finding centered on the General Fund, which serves as the city's primary unrestricted funding source. General Fund revenues of $108.7 million fell short of expenses totaling $127.2 million, creating an $18.5 million deficit that pushed the city into emergency reserves. The committee learned that sales tax revenues, one of the city's largest revenue sources, have been essentially flat for three years despite inflation eroding purchasing power by approximately 13%. Mayor Kim Lund acknowledged the gravity of the situation, explaining that staff implemented 6% cost reductions across all departments except police and fire in 2024, and are now undertaking an additional 3% reduction exercise that includes all departments. The city has also conducted "Ask Me Anything" sessions to communicate the situation to staff and prepare for potential further cuts. Council members explored the disconnect between the General Fund crisis and the city's ability to continue spending millions on park acquisitions and infrastructure projects, with Council Member Michael Lilliquist noting public confusion about simultaneous budget crisis messaging and major expenditures. Mayor Lund emphasized that the city operates 50 restricted funds with healthy balances, but the General Fund crisis threatens essential services like police, fire, and basic city operations.

No formal votes were taken during this informational presentation. The primary action was receiving the 2024 year-end financial report and staff's analysis of the city's financial position entering 2025. Staff announced plans to bring forward reappropriations at the March 24 meeting, which will establish beginning reserves across all funds and identify projects from 2024 that need to carry forward i…

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**General Fund Revenue Crisis**: The discussion centered on the structural challenges facing the General Fund, where sales tax and business & occupation tax have become the largest revenue sources but also the most volatile. Sales tax collections have been flat at approximately $33 million annually for three years (2023-2025), while inflation has reduced the real purchasing power of these revenues. Finance Director Asbjornsen noted that when adjusted for inflation to 2019 dollars, the city is seeing reduced spending capacity despite stable nominal revenues. **Emergency Reserve Position**: The city's financial policy establishes different "layers of the cake" for reserves, with economic reserves providing the first buffer before dipping into emergency reserves. With only $361,500 remaining in economic reserves and the 2025 budget projecting a $1.5 million deficit, the city expects to draw further into emergency reserves thro…
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**Finance Director Andy Asbjornsen** emphasized the complexity of year-end financial reporting and the uncertainty facing municipal budgets nationwide. He described the current economic indicators as showing a "complete unknown" with a "very, very cloudy" crystal ball for future projections. **Mayor Kim Lund** stressed the city's commitment to transparency and partnership with council during this challenging period. She highlighted the city's approach of implementing thoughtful, proactive cost reductions rather than reactive emergency measures. **Council Member Daniel Hammill** focused on ensuring the city maintains its commitment to vot…
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**Andy Asbjornsen, on economic uncertainty:** "What we're seeing now in the market is kind of a complete unknown as to what we're doing as an economy. And the crystal ball is very, very cloudy at this point as we try to evaluate what the future holds." **Mayor Kim Lund, on the budget situation:** "Certainly ending this year in our emergency reserves is deeply concerning. It obligates us to put a plan in place and puts us in a pretty restrictive place." **Mayor Kim Lund, on cost reduction str…
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**March 24, 2025**: Staff will present reappropriations from 2024 projects that need to carry forward into 2025, along with updated beginning fund balances across all city funds. **March 31, 2025**: Chair Anderson scheduled a meeting with Finance Director Asbjornsen to discuss budget monitoring strategies. **Ongoing**: Additional 3% cost reduction exercise across all departments, including police and fire, with departments identifying potential savings areas. **Ongoin…

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The city's financial position deteriorated significantly from the previous year, with General Fund reserves dropping from $40.8 million to $22.8 million, a 44% decline. The city moved from having some economic reserves to operating with only $361,500 remaining above the emergency reserve threshold. Sales tax revenues declined 5% compared to budget expectations and 1% from the prior year, confirming the three-year trend of flat revenues. Construction-related sales tax, previously the second-largest category, dropped to fourth place with a 13% year-over-year decline. The c…
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# A Sobering Financial Reality Check in the City of Bellingham ## Meeting Overview On a chilly March afternoon in Bellingham's Council Chambers, the city's newly reconvened Budget and Finance Committee gathered for what would prove to be a sobering assessment of the municipality's financial health. Committee Chair Lisa Anderson, flanked by Council Members Dan Hammill and Michael Lilliquist, welcomed Finance Director Andy Asbjornsen for the 2024 year-end financial review — the first such presentation to the revived committee. The meeting marked the end of the city's 2023-2024 biennium and transition to annual budgeting, but the numbers Asbjornsen presented painted a concerning picture. With sales tax revenues flatlining for three consecutive years, construction activity remaining stubbornly low, and the city's general fund reserves dwindling to just $361,500 above emergency levels, Bellingham finds itself navigating treacherous financial waters at a time of unprecedented federal uncertainty. What emerged from the hour-long presentation was not just a technical accounting of municipal finances, but a candid acknowledgment from city leadership that difficult decisions lie ahead — decisions that could fundamentally reshape how Bellingham delivers services to its residents. ## The Sales Tax Plateau and Economic Headwinds Asbjornsen began with sales tax, the city's most volatile and increasingly important revenue source. The trends he outlined were stark: after robust growth in 2021 and 2022, sales tax revenues have essentially plateaued. "We're seeing all those lines actually overlap each other," he explained, referring to a chart showing 2023, 2024, and projected 2025 revenues hovering around the same $33 million mark. "We're starting to see really flattening out of our sales tax." The situation becomes more alarming when adjusted for inflation. While the city collected roughly the same nominal dollars over the past three years, the purchasing power of those dollars has eroded significantly. Asbjornsen noted that the city's sales tax r…
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### Meeting Overview The Bellingham Budget and Finance Committee met on March 10, 2025, for their first reconvened session to review the city's 2024 financial year-end results. Finance Director Andy Asbjornsen presented the preliminary financial position as of December 31, 2024, marking the end of the 2023-2024 biennium before transitioning to annual budgeting. ### Key Terms and Concepts **Biennium:** A two-year budget cycle. The city just completed its 2023-2024 biennium and is transitioning to annual budgeting. **General Fund:** The city's one unrestricted resource that pays for basic government services like police, fire, libraries, and parks. This is separate from the city's 50 other specialized funds. **Sales Tax (B&O Tax):** Business and Occupation tax collected from local businesses. A key revenue source that has been declining. **Emergency Reserve:** 18% of operating expenses set aside for emergencies, calculated at about $21.5 million for 2025. **Economic Reserve:** Additional reserves beyond the emergency fund. The city currently has only $361,500 in economic reserves. **Reappropriations:** Budget items approved in one year but not spent, requiring council approval to carry forward to the next year. **GMT Funds:** Ground Emergency Medical Transport funding from Medicaid reimbursements, totaling about $3 million annually. **Yield Curve:** An investment indicator showing interest rates across different time periods, used to predict economic conditions. ### Key People at This Meeting | Name | Role / Affiliation | |---|---| | Lisa Anderson | Committee Chair, Council Member | | Daniel Hammill | Committee Member, Council Member | | Michael Lilliquist | Committee Member, Council Member | | Andy Asbjornsen | Finance Director | | Kimber…
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Budget & Finance Government Operations HB 1590 HB 1867 Budget Finance Committee City Council Finance Department Fire Department Police Department Whatcom County Andy Asbjornsen Blake Lyon Daniel Hammill Kim Lund Lisa Anderson Michael Lilliquist Behavioral Health Budget Finance Cost Reductions Emergency Reserves Federal Funding General Fund Housing Budget Jail Planning Medicaid Public Safety Sales Tax