# A Tale of Two Public Hearings: Property Taxes and ADU Reform in Bellingham The Bellingham City Council convened on October 20, 2025, for what would become an evening dominated by two substantial public hearings that capture the city's ongoing balancing act between fiscal responsibility and housing policy innovation. Council President Hollie Huthman presided over the meeting, with all seven council members present in the council chambers at City Hall. Mayor Kim Lund joined remotely from home, contributing her perspective to what would prove to be a consequential evening of municipal governance. ## The Economic Landscape: Revenue Projections and the Property Tax Decision The evening's first major item was a required public hearing on the city's 2026 revenue projections, including the proposed 1% increase to the regular property tax levy. Finance Director Andy Asbjornsen introduced Eric Johnson, Budget & Treasury Manager, who delivered a comprehensive presentation that painted a picture of economic uncertainty and cautious municipal planning. Johnson's analysis began with the broader economic context that shapes Bellingham's financial planning. "After COVID we had a large spike in inflation," he explained, noting how the Federal Reserve's response with increased interest rates had created the intended cooling effect. But the result has been persistent inflation above the Fed's 2% target, creating ongoing economic uncertainty that directly impacts the city's revenue streams. The presentation revealed concerning trends in the city's largest revenue source: sales tax. Johnson showed how sales tax revenue has essentially flatlined, with fluctuations "dipping above and below that green line which has resulted in really a flattening of revenue to the general fund from sales tax." While the city expects to meet its targets, much of the increase in sales tax to the general fund comes from redistributing existing funds rather than genuine growth. Construction activity, traditionally a strong indicator of economic health, tells a mixed story. After a COVID-driven surge in permits in 2021, activity declined through 2024. "We did see that decrease translate to lower sales tax," Johnson noted. However, 2025 has shown a rebound, with construction value and number of units jumping back up, possibly driven by declining interest rates. The housing market data revealed interesting dynamics. Active listings have been increasing, suggesting inventory is "sitting around a little bit longer" and resulting in average listing prices going down. This represents a cooling from the pre-rate hike trajectory, where prices were "going up significantly." Perhaps most concerning was the labor market analysis. While unemployment has decreased in 2025, the data reveals this improvement masks a troubling trend: "We have a large decrease in labor force participation in 2025 which has brought down the unemployment rate and is another signal of a weakening job market." People are not finding jobs; they're leaving the workforce entirely. Given this economic backdrop, the city's proposed property tax increase takes on additional significance. The 1% increase, combined with new construction, would generate approximately $782,000 in additional revenue. For the owner of a $600,000 home, this translates to roughly a $22 annual increase in property taxes. Johnson explained Washington's budget-based property tax system through a helpful example of an imaginary taxing district with two houses. The key insight is that when property values increase disproportionately, the tax burden shifts accordingly, even within the same budgeted levy amount. As he demonstrated, "the taxes will change by the proportional rate." The presentation concluded with a sobering look at the city's fiscal trajectory. Despite various rounds of budget discussions that have extended the timeline, the city's emergency reserves are still projected to be "nearly completely depleted in 2029." As Johnson put it bluntly, "We will need to look to change direction on that in the near future." The public hearing drew two speakers, both raising important concerns about accountability and transparency in city spending. Adam Bellinger noted that his home's assessed value had actually decreased by 4.1%, raising questions about how the tax increase would affect him personally. He called for "better visibility in the use of funds," particularly regarding departmental and contract performance. Brian Gas delivered a more pointed critique of what he sees as a pattern of government spending without accountability. "My taxes right now are 36% higher than it was three years ago," he said, expressing frustration with what he perceives as automatic requests for more money regardless of performance. He specifically criticized the permitting department, noting that they're processing fewer permits than in 2007 "with double the amount of people" but higher costs. Council Member Dan Hamill raised sophisticated questions about broader economic indicators, specifically inverted yield curves on bonds, which historically predict recessions. Johnson acknowledged the challenge of economic forecasting in the current environment: "The economic predictors that we've had in the past don't... it's hard to tell what to trust anymore, I guess, in this unusual time." Council Member Anderson pressed on federal employment impacts, concerned about how government job losses might affect the local economy given that federal positions tend to offer "benefits, retirement, and better wages" compared to the prevalent service sector jobs that are "barely above minimum wage." No formal action was taken on the property tax proposal, as the ordinance will be brought forward at the next council meeting for consideration. ## ADU Reform: Navigating State Mandates and Local Concerns The evening's second major public hearing addressed proposed amendments to Bellingham's accessory dwelling unit (ADU) regulations, designed to comply with Washington State House Bill 1337. Planning Director Blake Lyon set the stage by explaining this would be part of a suite of housing-related code amendments the council would consider through the end of the year, including middle housing and design review changes. Planner Chris Koch walked the council through the evolution of Bellingham's ADU policy, using a compelling chart that demonstrated how reducing regulatory barriers directly correlates with increased development. When the city first permitted ADUs in 1995, they were limited to attached units in single-family zones only. In 2009, detached ADUs were allowed but only in multifamily zones, resulting in an average of just six ADUs per year from 2009-2017. The breakthrough came in 2018 when detached ADUs were allowed in single-family zones for the first time. "We got an immediate uptake in those and averaged well into the 40s per year," Koch reported. Then in 2023, when the city partially implemented HB 1337 requirements—allowing 1,000 square foot ADUs, two ADUs per property, and various combinations of attached and detached units—development nearly doubled again. The proposed ordinance would complete the state-required implementation by eliminating owner-occupancy requirements citywide, a change mandated by state law. It would also allow ADUs with all middle housing types (duplexes, triplexes, fourplexes), eliminate various exemptions, and streamline the review process. The Planning Commission had recommended three specific changes beyond the basic state requirements. Two proved uncontroversial: eliminating the requirement for neighbor agreement to reduce setbacks in the rear 32 feet of properties, and eliminating minimum parking requirements for ADUs. The third recommendation—retaining and revising utility sharing provisions—drew staff opposition due to the complexity of various ownership scenarios now possible under state law. The public hearing attracted the same two speakers from the earlier session, both focusing heavily on parking concerns. Adam Bellinger, while "broadly supportive of the changes," argued against eliminating parking requirements entirely. "Parking's difficult to get back once you eliminate it," he said, viewing parking as "a quality of life issue" that could create neighborhood friction. Brian Gas was more emphatic in his opposition to parking elimination, drawing on his real estate experience. "I don't know if any of you guys at the planning department or the city actually care what happens to people who own property already," he said, arguing that nobody would buy a property "that has no yard, no parking" and expressing skepticism about the condominium subdivision possibilities being promoted by staff. The council discussion revealed sophisticated understanding of the complex policy landscape. Council Member Michael Lilliquist raised important questions about the condominium subdivision provisions, confirming they were required by state law. He then articulated a thoughtful concern about ownership opportunities, noting that eliminating owner-occupancy requirements could advantage investors over resident-owners since "higher housing prices for the investor are actually a source of revenue whereas higher housing prices for an owner are just higher mortgage costs." Council Member Jace Cotton clarified that Senate Bill 5184 will require eliminating parking mandates for any unit under 1,200 square feet by January 2027, making the current discussion largely about timing and consistency. The technical discussion about utilities revealed the complexity of modern housing policy. Director Lyon explained that shared utilities made sense when ADUs were simple additions to single-family homes, but with the proliferation of middle housing options and potential multiple ownership scenarios, "having it written in the ADU section... doesn't really give you the broader conversation overall." Council Member Anderson requested detailed information for the committee discussion about impact fees, development envelopes, and visual representations of what maximum development might look like on typical lots. "Eventually you run out of room," she noted, expressing concern about green space, stormwater management, and impacts on neighboring properties. Rather than proceeding with first and second readings, Council Member Hamill moved to refer the item to Committee of the Whole for further discussion. The motion passed unanimously, ensuring more detailed examination of these complex issues. ## Mayor's Report: Community Engagement and Recognition Mayor Lund's remote participation added several noteworthy elements to the evening. She successfully appointed Adonia Cairns to the Arts Commission, received unanimous council approval, and used her time to highlight recent community achievements and city initiatives. She praised the community's conduct during the "No Kings Rally" at Maritime Heritage Park over the weekend, noting it was "a peaceful gathering throughout the day with great costumes, music, dancing, and certainly powerful words in support of our democracy." The mayor, along with Council Member Hamill and Deputy Keller, had monitored the event from the police incident command center. Lund highlighted the afternoon's Committee of the Whole presentation on the final chapters of the Bellingham Plan, particularly emphasizing the new community well-being and civic practices chapter. "This chapter recognizes and amplifies equity, belonging, and community engagement work that has been underway for years," she explained, while also expanding these values citywide. The mayor also detailed ongoing tribal relationship building, noting that city staff and leaders had visited the Lummi Nation three times the previous week—to celebrate Indigenous People's Day, collaborate on natural resources issues, and support safe housing for tribal members affected by domestic violence. In a lighter moment, she expressed "deep gratitude to the Mariners for some thrilling October moments," acknowledging the community's shared baseball enthusiasm. ## Committee Reports: Budget Work and Environmental Protection The day's committee sessions covered significant ground. The Committee of the Whole budget work session featured presentations from Information Technology Services Director Don Burdick and Library Director Rebecca Judd about their departments' 2026 proposed budgets. The IT budget reflected challenging times, with elimination of several key positions including the chief information security officer, project manager and database administrator, and a part-time network consultant position. The focus remains on "sustaining core support and infrastructure and software services." The library budget proved particularly sobering. Four vacant positions totaling 3.25 FTE would be eliminated, including outreach specialist, branch specialist, public services clerk, and library assistant positions. Most significantly, the library would reduce operating hours, closing on Sundays and operating six days per week instead of seven. However, Library Director Judd's presentation also highlighted remarkable community engagement. From January to September 2025, the library circulated 1.4 million items and welcomed over 360,000 visitors to its four locations. "One in four Bellingham residents across all ages used their Bellingham Public Library card in the past three months," she reported, with 55% of residents having used their library card over the past three years. The library's programming remains robust despite budget constraints, continuing to offer 17 story times per week during fall, winter, and spring, including two bilingual sessions in Spanish and English. The digital equity program continues with 74 circulating high-speed hotspots, with Director Judd noting that "for every one hotspot that is checked out, there is one person waiting to check one out." The Public Works and Natural Resources Committee advanced two significant environmental initiatives. The Bellingham Mitigation Bank ordinance establishes the framework for operating the city's wetland mitigation bank, a nearly decade-long project nearing completion. The bank will improve ecological success of mitigation projects while streamlining the process for public and private entities. The Lake Whatcom Invasive Freshwater Mussel Rapid and Extended Response Plan represents the first locally-led, site-specific plan of its kind in Washington state. The plan addresses the threat of quagga, zebra, and golden mussels that have been detected in nearby states and pose significant risks to drinking water infrastructure, water quality, and the lake ecosystem. The plan encompasses three focus areas: prevention through permitting and inspection systems at boat launches; monitoring and testing to ensure prompt detection; and response protocols should invasive mussels be discovered. As consultant Mark Cecchini Beaver explained, this contingency planning is essential given the "prevalence of these mussels being detected in neighboring and close proximity states." ## Executive Session Actions and Routine Business The evening's executive session resulted in one significant action: authorization for the mayor to sign onto an amicus brief in United States v. Newark et al., a federal case. While the details weren't discussed publicly, the unanimous council support suggests the case touches on issues of municipal importance. The consent agenda and final ordinance consideration proceeded smoothly. The council approved meeting minutes, financial transactions, and payroll authorizations without discussion. They also gave final approval to an ordinance creating a new fund for Central Library renovation and amending the 2025 budget, enabling the continued $2 million investment in library infrastructure through real estate excise tax funding. ## Looking Ahead: November's Critical Decisions The meeting concluded with announcements about November 3rd public hearings on three major items that will shape Bellingham's future. The council will consider extending interim parking regulations for another six months, adopt the comprehensive Bellingham Plan that addresses recent state legislation and shifted priorities, and review the proposed 2026 budget. These upcoming decisions, combined with the evening's discussions about property taxes and ADU reform, illustrate the complex challenges facing municipal government. Bellingham must balance fiscal sustainability with community needs, comply with state housing mandates while addressing local concerns, and maintain essential services during uncertain economic times. As Council President Huthman adjourned the meeting at 9:07 p.m., the evening's proceedings had laid bare the intricate work of local governance—technical budget presentations that affect real families, housing policies that reshape neighborhoods, and the ongoing effort to build community consensus around challenging decisions. The city faces a future where traditional revenue sources show limited growth, state mandates require significant policy changes, and community needs continue expanding. How Bellingham navigates these challenges in the coming months will significantly impact both its fiscal health and its character as a community. The November 3rd hearings will provide the next critical opportunity for public input on these consequential decisions.

### Meeting Overview The Bellingham City Council met on October 20, 2025 for their regular meeting, focusing heavily on budget revenue projections and housing policy updates. The council held two public hearings - one on a proposed 1% property tax increase for 2026 and another on changes to accessory dwelling unit (ADU) regulations to comply with state housing laws. ### Key Terms and Concepts **Property Tax Levy:** The amount of property tax revenue that a local government is authorized to collect, set annually by the city council within state-imposed limits. **Accessory Dwelling Unit (ADU):** A secondary housing unit on a single-family residential lot, such as a converted garage or basement apartment, intended to increase housing options. **Owner Occupancy Requirement:** A rule that required property owners to live on-site when renting out ADUs, which the state now prohibits cities from enforcing. **Inverted Yield Curve:** An economic indicator where short-term bond interest rates exceed long-term rates, historically a predictor of recession. **General Fund:** The city's primary operating account that pays for basic services like police, fire, parks, and administration. **Middle Housing:** Housing types between single-family homes and large apartment buildings, including duplexes, triplexes, and fourplexes. **Condominiiumization:** The process of converting rental units into individually owned condominiums that can be sold separately. **Mitigation Bank:** A conservation program where the city can create wetland credits to sell to developers who need to offset environmental impacts. ### Key People at This Meeting | Name | Role / Affiliation | |---|---| | Hollie Huthman | Council President (Second Ward) | | Hannah Stone | Council Member (First Ward), Public Works Committee Chair | | Kim Lund | Mayor (participated remotely) | | Eric Johnson | Budget & Treasury Manager | | Blake Lyon | Planning & Community Development Director | | Chris Koch | City Planner | | Adam Bellinger | Resident, public speaker | | Brian Gas | Resident, real estate agent, public speaker | ### Background Context Bellingham is navigating significant budget pressures while implementing new state housing laws. The city faces a projected $10 million budget deficit by 2027, with emergency reserves nearly depleted by 2029. This financial strain comes as the city must comply with multiple state mandates requiring more housing density and fewer barriers to construction. The 1% property tax increase, while modest, is part of broader efforts to maintain city services amid economic uncertainty. Meanwhile, housing policy changes reflect Washington State's aggressive push to address the housing crisis by forcing local governments to allow more housing types and remove obstacles like parking requirements and owner-occupancy rules. ### What Happened — The Short Version The council held two public hearings but took no final action on either issue. Finance staff presented revenue projections showing continued economic uncertainty, with declining sales tax revenues and a weakening job market. A proposed 1% property tax increase would generate about $782,000 additional revenue and cost the average homeowner about $22 more annually. Planning staff then presented required changes to ADU rules, removing owner-occupancy requirements and allowing ADUs to be combined with middle housing. Both hearings drew criticism from residents concerned about rising taxes and inadequate parking. The ADU discussion was referred to committee for further review, while the property tax ordinance will return for a vote at the next meeting. ### What to Watch Next - November 3rd council meeting will include three major public hearings: parking requirements, the comprehensive plan, and the full 2026 budget - ADU ordinance discussion continues in committee before final council vote - Property tax levy ordinance must be passed by end of November to take effect in 2026 ---

**Q:** What percentage increase in property taxes is the city proposing for 2026? **A:** 1% increase, which is the maximum allowed by state law without voter approval. **Q:** How much additional revenue would the 1% property tax increase generate? **A:** Approximately $782,000, including both the levy increase and new construction. **Q:** What would the 1% tax increase cost the owner of a $600,000 home? **A:** About $22 more per year in city property taxes. **Q:** What percentage of total property tax revenue does the city receive? **A:** About 18.5%, with the largest portions going to Bellingham School District and state schools. **Q:** What state law requires changes to ADU regulations? **A:** House Bill 1337, which requires cities to reduce barriers to accessory dwelling unit construction. **Q:** What major ADU requirement is being eliminated? **A:** The owner occupancy requirement, which previously mandated that property owners live on-site. **Q:** How many ADUs per property would be allowed under the new rules? **A:** Up to two ADUs per property, which can be attached, detached, or any combination. **Q:** What is the maximum size allowed for an ADU? **A:** 1,000 square feet, increased from the previous 800 square feet. **Q:** Who is Blake Lyon? **A:** Director of Planning and Community Development for the City of Bellingham. **Q:** Who is Eric Johnson? **A:** Budget & Treasury Manager who presented the revenue forecasts. **Q:** What happened to the civilian labor force participation in 2025? **A:** It declined, meaning fewer people are actively looking for work, which artificially lowered unemployment rates. **Q:** What are the main categories driving sales tax revenue decline? **A:** Construction of buildings is down significantly due to inflation and higher interest rates. **Q:** How many people used Bellingham Public Library cards in the past three months? **A:** One in four Bellingham residents across all ages. **Q:** What is the projected timeline for emergency reserves to be depleted? **A:** Nearly completely depleted by 2029 according to current budget projections. **Q:** What action did council take on the ADU ordinance? **A:** Referred it to committee for further discussion rather than voting on first and second reading. **Q:** What is the city's approach to combining ADU and middle housing rules? **A:** Coordinating amendments to align ADU rules with middle housing requirements and design review processes. **Q:** What percentage of the city's budget is now payroll costs according to public testimony? **A:** About 56%, up from 42% twenty years ago, according to resident Brian Gas. **Q:** When will the Lake Whatcom mussel response plan take effect? **A:** It was approved as Resolution #2025-23 and is now in effect. **Q:** What is the status of the central library renovation funding? **A:** $2 million in Real Estate Excise Tax (REIT) funding was approved for the next renovation phase. **Q:** How many hours per week of story times does the library offer? **A:** 17 story times per week during fall, winter, and spring, with two offered bilingually in Spanish and English. ---