Mountlake Terrace staff outline choices to close a multimillion‑dollar gap: layoffs, new taxes or service cuts

City staff told the Mountlake Terrace City Council on March 12 that a fiscal sustainability task force and staff analyses identify a structural shortfall that will require a mix of savings and new revenue to restore reserve levels and balance the general fund.

Deputy City Manager Carolyn and City Manager Jeff Knighton presented preferred and alternate budget strategy packages, describing a baseline forecast staff summarized as an annual deficit of roughly $4,200,000 per year through 2030 and a further increase they quantified in the presentation as $5,400,000 through 2035. To close the gap and rebuild reserves toward a 20% target, staff said the packages combine one‑time historical savings, cost efficiencies and potential revenue measures.

What was proposed: staff said the preferred package relies on three principal revenue elements and cost adjustments: (1) using 100% of the city’s property tax bank capacity (staff quoted an amount of $2,400,000), (2) a Transportation Benefit District (TBD) sales tax that staff estimated could raise about $835,000 annually if dedicated to streets, and (3) a planned 5% reduction in general fund expenses (described as a $1,000,000 target over two years, though staff noted additional historical savings and revisions reduced some of that estimate). Staff also described an alternative that would use 75% of bank capacity, implement a $20 license/tab council‑imposed fee instead of the sales tax, and eliminate one police position as part of the mix.

Service‑level consequences: staff walked council through cumulative contingency phases (Phase 1–4) showing progressively deeper cuts if revenue options or bank capacity are not approved. Examples included reductions in software subscriptions ($50,000 target), repurposing unfilled positions (staff said they identified roughly $703,000 in historical budget savings), shifting some street costs out of the general fund (about $72,000), and proposals to increase some fees (permit fees, rental fees, plaza rentals). More consequential cuts in later phases would affect parks and recreation heavily: Phase 4 would close the recreation pavilion and eliminate most recreation programming in Mountlake Terrace (staff said this could affect 38 FTEs tied to recreation shifts, described as equivalent to about 108 individuals with 14 full‑time positions), reduce park maintenance, delay equipment replacement in police and public works and reduce training to mandatory topics.

Councillor reaction and concerns: council members repeatedly pressed for clearer cause‑and‑effect language to communicate to voters, warned about using one‑time REET (real estate excise tax) for recurring needs, and emphasized the risks of relying on voter approval for multiple ballot measures. Mayor Pro Tem Wall and others said tapping REET would be a "hard no" because REET is one‑time revenue intended for capital; several council members asked staff for concrete examples of what cuts mean on the ground — e.g., less frequent mowing and trash pickup in parks, reduced permit processing speed, and fewer recreation offerings.

Staff also warned of operational risks. The city manager said staff reductions in finance could impair the city’s capacity to respond to public records requests and noted Washington’s open‑records statute has strict compliance requirements. On public safety, staff cautioned that Washington already has a low officer‑to‑population ratio and that reductions could stretch response capabilities and training.

Votes or formal actions: council took a procedural voice vote early in the meeting to excuse Council member Sonmore (moved and seconded; chair reported unanimous ayes). No final votes on budget packages or voter measures were taken; staff framed the presentation as a request for direction and asked council to pick a path this spring so staff can plan for the 2027–28 budget and for any ballot timelines in 2027–2028.

Next steps and timing: staff requested council indicate a high‑level path forward this spring (April–May preferred) so resolutions or ballot preparations could follow. Staff said a bank‑capacity vote would be scheduled as a resolution in November; a TBD sales tax or council‑imposed license/tab fee would need a separate timeline (staff said a sales‑tax measure would likely need a 2027 resolution to collect revenues in 2028). Staff offered to return with more detailed cost/impact analyses and materials for voter education.

Representative quotes: Deputy City Manager Carolyn said, "We're looking at increasing or reducing expenditures and or increasing revenues to the tune of $4,000,000 a year," and later that Phase 4 would mean "no more recreation program in Mount Lake Terrace." Council member Murray said she supported the preferred package in principle but asked staff to avoid asking voters twice for separate measures if possible.

Why it matters: staff framed the proposals as a combination of tough choices that trade service levels for financial stability. Council members voiced concern about the social and operational impacts of the deeper cuts and emphasized the need for clear communication with residents before any voter measures.

What’s next: staff will return with more detailed analyses, explicit examples of service impacts, and proposed public outreach materials; council signaled it would aim to select a high‑level direction this spring and could bring measures to voters in 2027–2028 depending on the chosen package.