Lynnwood increased property and utility taxes, but a $4.8M gap remains: How did we get here? 

The Lynnwood City Council spent nearly four hours on Nov. 24 approving major tax and fee hikes aimed at narrowing the City’s $8 million general fund deficit. Councilmembers adopted a 23% property tax levy increase and a 4% utility tax increase — changes expected to bring in about $2.9 million for 2026.

An initial proposal for a 53% property tax levy hike was rejected. Instead, the Council approved a 23.6% increase, raising the annual levy from $7.2 million to $8.9 million and generating just over $1 million next year. The Council also approved 1% increases to water, sewer, surface water and solid waste tax rates, boosting the current 6% rate to 10% and adding an estimated $1.9 million.

Even after Monday’s votes — and more than $12 million in cuts this year — a $4.8 million deficit remains for 2026, Finance Director Michelle Meyer said. If the shortfall persists, Lynnwood could face state penalties that jeopardize its ability to secure grants, bonds and other critical funding. “It’s a very real possibility that we’ll have to do additional cuts next year even with all of this action,” Meyer told the council.

Here’s what to know about Lynnwood’s budget deficit – from how the City got here to what actions Council has taken and plans to take to close the gap. 

23% Property Tax Levy increase

The Council opted for a 23.6% property tax hike — well below the staff-proposed 53% — lifting the rate from $0.67 to $0.77 per $1,000 of assessed value. For a $660,000 home, taxes will rise by about $84 in 2026. The $8.9 million levy also preserves $2.1 million in banked capacity. Councilmember George Hurst, set to replace Mayor Christine Frizzell in January, proposed the amended motion. He said this gives next year’s administration more flexibility to craft long-term revenue solutions. Monday’s vote comes nearly a year after a 52% hike was approved for 2025.

Alongside Hurst, Councilmembers Derica Escamilla, Robert Leutwyler and Patrick Decker supported the reduced increase, while Nick Coelho, David Parshall and Josh Binda opposed it. Hurst warned that collecting the full banked capacity risked putting Lynnwood in a situation like Edmonds, where voters in November rejected a $14.5 million levy lid lift after the City collected its full banked capacity in 2023. 

“We can’t fix this tonight, God darn it,” Hurst said to the Council. “I beg you to let a new administration look at this, do what we have to do this year… then the new administration can start looking and see if we can resolve some things, besides having tremendous tax fees and increases.”

The debate centered on how much residents could reasonably absorb. Hurst noted that homeowners, businesses and renters would all feel the impact. Council President Coelho countered that the full levy would raise taxes by just $2-$13 a month in lower-income neighborhoods — an increase he said was necessary to maintain essential services.

“My appeal is that you don’t use renters as a human shield for your war on responsible budgeting,” he said. “It’s really uncomfortable… but someone’s got to make these decisions. I wonder if we can rise to the occasion.”  

Councilmember Leutwyler argued that a levy increase is the most responsible way to address the City’s financial crisis, saying further staff or service cuts and delayed infrastructure work would cost more in the long run. He added that police savings haven’t materialized after cutting over 20 positions, as remaining officers are relying heavily on overtime to meet demand.

Increased utility taxes and connection charges 

Monday marks Lynnwood’s first utility tax rate increase since 2014. The council also approved a new water connection charge and increased a sewer connection charge for new developments. 

Monday’s increases would raise the average Lynnwood homeowner’s utility bill by $7.55 monthly, or $90.60 annually. The motion was supported by Councilmembers Parshall, Leutwyler, Binda and Coelho and rejected by Councilmembers Hurst, Escamilla and Decker. 

New developments will now face a $1,932 water connection charge per meter capacity equivalent. The sewer connection charge jumps from $4,000 to $11,720 per equivalent residential unit. These one-time charges will fund capital projects and help keep monthly rates down, Public Works Director Jared Bond said, noting that accessory dwelling units (ADUs) are exempt and developers may apply to delay payment.

During public comment, a representative of the Master Builders Association of King and Snohomish counties urged the council to pause the increases, warning they could hinder affordable housing construction. 

The Council unanimously approved the new water charge, but voted 5-2 in favor of increasing the sewer charge. Councilmembers Hurst and Escamilla voted against. 

Other business

The Council unanimously adopted several planning measures, including the 2025 Comprehensive Plan Amendment list, the six-year Transportation Improvement Program and the six-year Capital Facilities Plan. Members also approved updates to Title 13 governing water, sewer and surface-water systems, with clarifications to definitions and billing rules scheduled to take effect Jan. 1, 2026.

Councilmembers then moved through mid-biennial budget amendments required by state law. Key changes include a $1.3 million reduction in fleet charges, $351,100 in increased legal costs and $3.2 million in new criminal justice grant funding. Overall, amendments reflect $8.8 million in additional revenue and $9.7 million in new expenditures. Final adoption is set for Nov. 24.

Budget breakdown: How did we get here? 

The Council adopted the 2025–26 budget last year, expecting $27 million in revenue growth — driven by population increases, a 52% levy hike and other factors. The budget also added 27 positions, including police and human service roles supported by one-time federal COVID aid.

But by early 2025, revenues had stalled. First-quarter reports showed zero growth over 2024, leaving Lynnwood on track for a $25 million deficit by the end of 2026 if no action was taken. Mayor Frizzell ordered $12.3 million in cuts, eliminating the equivalent of nine full-time positions across departments, including the City’s equity and social justice advisor and more than $4 million from police through freezes and vacancies.

On top of that, the costs of goods and services were rising, while the City’s construction projects got more expensive. As a result, less revenue was coming in as external developers delayed key projects, staff said. 

The Council in October changed its emergency fund policy to cover the deficit for 2025, leaving $4.8 million still unresolved for next year. 

Councilmembers on Monday expressed frustration over the situation. Despite reviewing revenue options for months, Councilmember Escamilla said she felt the solutions proposed by staff weren’t sufficient to address the problem at hand. 

“It was never outright made clear that the City was done with what they were going to do, and now it was all on us,” she said Monday. “It feels like [being] strong-armed into a corner that half of us aren’t comfortable with… because even if we do anything on the list, it’s still not enough. I’m just coming to the realization of the situation that we’ve been in.”  

Mayor Frizzell chimed in: “The Council has had a list of possible [revenue] increases at their disposal since July,” she said. “Could you talk about the effect of the one-time revenue that was used to create 20 new positions and the attitude of the Council at that time?” she asked Director Meyer. 

Meyer said in 2024 the Council added 10 positions that were funded by one-time grants. A few months after the new Lynnwood Community Justice Center opened, the City found more staff were needed to run the facility, and the Council approved those positions. 

“In addition to the debt that was taken on that we didn’t raise revenue specifically for, there were other positions and services added,” Meyer said. When staff realized earlier this year the budget wasn’t playing out as expected, the City had already “spent down” its emergency fund balance to continue to supplement things paid for by one-time funding. 

“And then we had the slowdown in the economy that further exacerbated the issues we were dealing with,” Meyer said. 

However, Hurst said he believed the current administration didn’t do a sufficient analysis of City spending before telling the Council there was sufficient funds to expand staff and services. He said the Council was unaware that $2.5 million in reductions were built into the 2025-26 budget by keeping eight police positions vacant – before 6.5 more positions were left unfilled this year. 

“The mayor’s budget, in the narrative, said this budget had funded those positions,” he said Monday. “To say that somehow this Council or former councils were just not aware of what they’re doing is not correct. It was perhaps the budget that had some problems.” 

Councilmember Decker chimed in, stating that when looking to hire additional staff, the Council was “looking at a budget that looked healthy enough to support all of that.” 

“We made decisions in the past that we have to figure out today, but those decisions were made based on sound budgetary principles,” he said. “We just had no way of knowing that everything was going to collapse the way that it did.” 

Revenue shortfalls

Sales tax: 

• 2025-2026 budgeted: $65.3 million
• Adjusted estimate: $57.4 million 
  • Collected as of Oct. 30: $25.2 million 

View Lynnwood’s October sales tax report here. 

Licenses and permits: 

• 2025-2026 budgeted: $10.2 million 
• Adjusted: $5 million 
  • Collected as of Sept. 30: $3 million 

Red light camera ticket fines:

• 2025-2026 budgeted: $20.3 million 
• Adjusted estimate: $12.1 million 
  • Collected as of Oct. 30: $4.7 million 

Budget adjustments and spending cuts as of Nov. 26 

View the full list of reductions here. 

What’s next? 

Beyond tax and fee increases, the Council has been exploring additional revenue options for months. Ideas include a public safety sales tax to reduce police department expenses from the general fund and potential increases to vehicle tabs, business license fees and head taxes.

More detailed budget projections will be presented after fourth-quarter 2025 financials are finalized, Meyer said. 

Find Lynnwood’s quarterly financial reports here. 

The meeting agenda and recording can be found on the city’s website.

— Contact Ashley at ashley@myedmondsnews.com.