### 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 | | Daniel Hammill | Committee Member, Third Ward Council Member (remote) | | Andy Asbjornsen | Finance Director | ### Background Context This financial review comes at a critical time for Bellingham. Like many cities across Washington, Bellingham is facing the challenge of flat revenue growth while service costs continue to rise. Sales tax revenue, historically a reliable growth engine, has plateaued for three consecutive years even as inflation erodes purchasing power. Meanwhile, the city has ambitious capital projects underway, including major sewer infrastructure upgrades and land acquisitions for parks and watershed protection. The city is preparing for its 2026 budget process with instructions already sent to departments asking them to identify potential 5-10% budget cuts. This reflects the reality that without significant changes, the city's emergency reserves could be depleted by 2028. The first quarter review provides an early snapshot of whether revenue trends are improving or if more aggressive budget balancing will be needed. ### What Happened — The Short Version Finance Director Asbjornsen walked through comprehensive slides showing that most city revenues are tracking close to budget expectations, but growth remains stubbornly flat. Sales tax revenue through May showed no meaningful growth compared to previous years, while construction-related taxes have declined 25%. The city's ambitious capital spending is proceeding well, with major land purchases and infrastructure projects underway. However, the general fund faces a projected $4.5 million deficit that could grow without intervention, prompting the mayor to ask departments for budget reduction scenarios. ### What to Watch Next - Second quarter financial review expected in July or August - Department budget submissions due in July with proposed 5-10% reduction options - September budget balancing meetings where difficult decisions will be made - September 29th presentation of the 2026 budget to council ---