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Budget and Finance Committee

BEL-BFC-2025-06-09 June 09, 2025 Budget & Finance Committee City of Bellingham 34 min
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The Budget and Finance Committee received the first quarter financial review for 2025, revealing concerning trends in the city's economic indicators and fiscal outlook. Finance Director Andy Asbjornsen presented data showing sales tax revenues have plateaued after years of growth, with construction activity down 25% and lodging tax declining significantly. The city's general fund faces a projected $4.5 million budget gap that could grow to $6 million by 2026, prompting Mayor Kim Lund to issue instructions requiring all departments to prepare 5% and 10% budget reduction scenarios. The presentation covered revenue performance through May 2025, showing sales tax collections at $13.4 million for the first five months—flat compared to recent years but tracking roughly on budget due to conservative forecasting. Real estate excise tax revenue increased by $500,000 compared to the previous year, driven by higher housing market activity and increased inventory. However, planning and development services revenue dropped $400,000, indicating reduced development activity in the pipeline. Major capital projects are proceeding as planned, with nearly $10 million in land purchases split between the Greenways Fund and watershed protection. The city is also advancing significant infrastructure projects including the Meter and James Street bridge replacements, Woburn facilities development, and the Service Operations Center (SOC) Phase 2 construction. The committee reviewed the 2026 budget development process, which will focus heavily on closing the general fund gap while maintaining essential services. Department heads have been instructed to evaluate all open positions and identify potential reductions, with draft budget requests due in July and final budget presentation scheduled for September 29th.

No formal votes were taken during this informational briefing. The committee received the quarterly financial report for information only, as outlined in AB 24565. The presentation served to update…

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**Revenue Performance and Economic Trends** Asbjornsen detailed concerning flatness in key revenue streams. Sales tax revenue has stagnated at approximately $33.4 million annually since 2022, despite inflation reducing the purchasing power of these dollars. The construction sector, a key economic indicator, saw a 25% reduction in sales tax generation compared to the previous year—a decline of $340,000. Motor vehicle sales jumped from second to first place among revenue sectors, possibly driven by tariff concerns prompting early purchases. **Housing Market and Development Activity** The housing market showed mixed signals. Active listings increased by about 200 units compared to March 2024, indicating more supply. Real estate excise tax revenue grew by $500,000, suggesting increased transaction volume. However, development services revenue fell by $400,000, and permit a…
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**Finance Director Andy Asbjornsen** emphasized the need for careful budget management while noting the city's strong performance on capital projects. He expressed concern about economic uncertainty affecting revenue forecasting, citing federal policy unknowns and flat growth trends. **Committee Chair Lisa Anderson** stressed the importance of public unders…
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**Andy Asbjornsen, on economic uncertainty:** "It's really hard to say what's going on in the economy. We see kind of fearful purchases when people are trying to purchase things in advance of tariffs, maybe hitting still unknown when it comes to what's going to go on with the federal funds rate." **Andy Asbjornsen, on sales tax trends:** "So even though we've been very flat at about 13.3, 13.3 now 13.4 over the last three years, the equivalent purchasing power has declined each of those three…
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- **July**: Draft work plans and budget requests due to budget department for mayor's office review - **July/August**: Second quarter financial review expected - **Late August/September**: Budget balancing and final decisions by department heads - **September**: Updated revenue forec…

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After this meeting, the Budget and Finance Committee is now fully briefed on the city's first quarter financial position and understands the scope of the upcoming budget challenges. The mayor's directive requiring 5% and 10% reduction scenarios from all departments is now active, with responses due in July. The committee is prepared for intensive budget discussions over the summer…
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## Meeting Overview On a bright sunny afternoon in June 2025, the Budget and Finance Committee of the City of Bellingham gathered for what Committee Chair Lisa Anderson called "our last committee meeting on this wonderful sunny day." The meeting convened at 4:05 PM in Council Chambers, with committee members Lisa Anderson presiding as chair, Michael Lilliquist present in person, and Daniel Hammill joining remotely. The single item on the agenda was the first quarter financial review of 2025 — a comprehensive look at where the city stood financially after the first three months of what Finance Director Andy Asbjornsen described as "the first quarter of our first annual budget." This quarterly review provided the first substantial checkpoint for Bellingham's 2025 budget performance, coming at a time when the city faces significant financial pressures. The presentation revealed a mixed picture: some revenue streams holding steady while others showed concerning declines, and a looming budget gap that would require difficult decisions in the months ahead. What made this meeting particularly significant was its role as a preview of challenges to come — the data showed potential shortfalls that could affect city services if not addressed proactively. ## First Quarter Financial Performance Finance Director Andy Asbjornsen began his presentation with an important caveat about the timing of financial data. "This is our most current information, even though we're always looking back in time and trying to project what's going to be forward," he explained, noting that sales tax data they were reviewing reflected March transactions received at the end of May. The cornerstone of the city's revenue — sales tax — told a story of stagnation that has become all too familiar to city leaders. "Sales tax is one of our primary drivers of our revenue within the city of Bellingham," Asbjornsen said, walking through data that showed the city collecting about $13.4 million in the first five months of 2025. While this was "right on par with what we've seen in the first five months of the previous years," it represented a troubling flatline in growth. The sales tax trend painted a stark picture when viewed over time. In 2021, the city collected about $30 million in sales tax. That grew to $32 million in 2022, then to about $33.6 million in 2023 (removing an unusual outlier in June). But 2024 saw a slight decline to $33.3 million, and 2025 was tracking similarly flat. "We're real…
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### Meeting Overview The City of Bellingham Budget and Finance Committee met on June 9, 2025 to review the city's financial position for the first quarter of 2025. Finance Director Andy Asbjornsen presented an overview of revenue trends, major expenditures, and budget projections, with particular focus on the city's declining emergency reserves and upcoming budget challenges for 2026. ### Key Terms and Concepts **General Fund:** The city's primary operating fund that pays for basic services like police, fire, parks, and administration. Currently facing a budget gap as expenses outpace revenues. **Emergency Reserve:** Money set aside for unexpected expenses or revenue shortfalls. The city aims to maintain $21.5 million but currently faces a $4.5 million gap that could grow to $6 million by 2026. **Sales Tax Revenue:** One of the city's primary revenue sources, currently running flat at about $13.4 million through the first five months of 2025, showing no growth after inflation. **Real Estate Excise Tax (REIT):** Tax on property sales that funds capital projects like affordable housing and transportation. Running stronger than expected in 2025 due to increased home sales. **Capital Expenditures:** Major infrastructure investments like land purchases, building construction, and equipment. The city has been very active in 2025 with nearly $10 million in land purchases. **BLS Transport:** Basic Life Support ambulance services provided by the fire department that generate revenue through billing. Temporarily down $350,000 due to billing service transition. **Waterfront Construction Fund:** A special Local Infrastructure Financing Tool (LIFT) fund collecting $1 million annually from the state to save for the future Bay Street Connector project to the waterfront. ### Key People at This Meeting | Name | Role / Affiliation | |---|---| | Lisa Anderson | Committee Chair, Fifth Ward Council Member | | Michael Lilliquist | Committee Member, Sixth Ward Council Member …
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Budget & Finance Government Operations Budget Finance Committee City Council Finance Department State Auditor Andy Asbjornsen Daniel Hammill Eric Johnson Kim Lund Lisa Anderson Michael Lilliquist Budget Finance Economic Development Housing Market Infrastructure Investment Sales Tax Watershed Protection