‘What’s the right balance?’ Lynnwood Council talks 2026 priorities amid budget shortfalls

Facing a multimillion-dollar budget deficit and a regional housing affordability crisis, the Lynnwood City Council Feb. 21 convened for its 2026 summit to outline legislative priorities and structural reforms for the upcoming year. 

The daylong special work session focused on the city’s budget and long-term financial sustainability, growth management, safety and transportation. It concluded with an exercise to identify the Council’s top priorities for 2026. 

Financial stability and budget deficit 

Financial consultant Mike Bailey, who has worked for several cities including Lynnwood, Everett, and Edmonds, opened the meeting with a presentation on the city’s fiscal health. Bailey briefed the Council on how a municipal budget works, how Lynnwood got to its current financial state and what the Council can do to close the deficit. 

Lynnwood began 2025 with a budget deficit of over $20 million, and has a $3.5 million deficit to close before the end of 2026, per state law. Bailey attributed the shortfall to a combination of national economic trends and decisions made on the local level.  

Like many cities nationwide, the COVID-19 pandemic had unexpected financial impacts on Lynnwood. At that time, the City saw an increase in revenue due to an unexpected surge in sales tax revenues and the receipt of federal American Rescue Plan Act (ARPA) funds. This led to overly optimistic revenue forecasting by the city going forward, including overestimating traffic safety camera revenues by $8.2 million and development fees by $5.1 million.

Fueled by the influx of one-time federal grants and optimistic revenue forecasts, the city increased its employee headcount by 23% (57.5 positions) between 2018 and 2026, which Bailey said added approximately $12 million to the general fund budget annually. He stressed that using one-time grant money to fund ongoing personnel costs was a primary driver of the city’s current imbalance.

“You’re faced with a quandary; We’ve added positions and provided service we can’t sustain,” Bailey told the council. 

Further straining the general fund was the City’s new Criminal Justice Center (CJC), Bailey said. The City issued limited-tax general obligation bonds to pay for the facility, adding nearly $7 million in annual debt service — $5.74 million of which must come directly from the City’s general fund. Initially, the City planned to offset operating costs by renting bed space to neighboring jurisdictions, but construction delays hindered those early revenue estimates.

Bailey also noted that state law caps property tax revenue growth at 1% annually. With inflation growing 30% to 40% over the last decade, and the City needing to significantly raise employee compensation to remain competitive in a highly portable labor market, the 1% cap mathematically prevents Lynnwood from keeping pace with its baseline operating costs, he said. 

As far as short-term financial solutions go, Bailey recommended the Council maintain its 35 open staff positions and focus on moving internal funds. He recommended the City charge its own internal capital projects (such as the Poplar Way Bridge construction) the same permitting and administrative fees that private developers pay. Doing so would transfer money from the capital budget back into the general fund to cover staff time. He also suggested the Council look into transferring any available one-time resources from the Criminal Justice Fund into the general fund. 

In the long term, the City could use Real Estate Excise Tax (REET) funds to pay for debt service for the Criminal Justice Center, though this could leave less money for future capital needs and facility investments. Since the City’s equipment and IT replacement funds are currently fully funded, Bailey said the Council could work to carefully reduce contributions to these funds to alleviate pressure on the general fund. 

Another option for additional funds is Lynnwood’s 0.1% Transportation Benefit District tax.  Approved by voters in 2017, the tax generates approximately $4 million annually for City transportation projects. It was set to expire next year, but recent changes in state law allow the City to extend the tax without public vote. Bailey suggested the Council approve the tax again, also noting that the Council could increase car tab fees from $20 to $50 to bring in further revenue. 

“You can’t continue the current level of service without incurring some additional tax,” Bailey said. “Somebody’s going to be paying those bills and that’s a burden on our community. But at the same time, we provide service. So what’s the right balance?”

Bailey concluded by stating that the financial crisis can only be solved if the City works together in a cohesive and collaborative effort. 

“To the extent you can remain collegial, professional, respectful and have hard conversations – that’s where you’re going to get the best outcomes,” Bailey said. 

Housing supply and affordability 

The Council then reviewed the progress of the 2021 Housing Action Plan (HAP), with presentations from Chris Collier of the Housing Authority of Snohomish County (HASCO) and City Planner Karl Almgren. The overarching goals of the HAP are to produce housing that meets community needs, preserve existing affordable housing, partner with housing organizations and prepare for continued regional growth.

Collier painted a stark picture of the region’s housing scarcity, noting that the surplus of housing stock in Snohomish County was entirely occupied by 2019. The median sale price for a home in Lynnwood has reached $819,000, requiring a household income of roughly $258,000 to afford a standard mortgage.

As a result, Collier said middle-class professionals are often priced out of homeownership in South Snohomish County on a single income including dentists, data administrators, accountants and engineers. Furthermore, home sales under $300,000 have virtually disappeared, while homes selling for over $1 million have grown to make up more than 20% of all sales in the county. Collier noted that this is not new construction; these are older homes (often built around 1990) selling for premium prices strictly due to supply scarcity, turbocharged by the high compensation of the region’s tech industry.

This lack of affordable homeownership has pushed workers farther away. Collier presented data showing that the largest growth demographic of Lynnwood’s new workforce commutes from more than 50 miles south, in areas such as Pierce County, simply because they cannot afford to live where they work.

“The gas pump doesn’t ask if you can afford it as a lifestyle, just if you can afford it that day,” Collier said. “But your leasing agent will.” 

Despite the overarching struggles, Almgren said Lynnwood has made strides in implementing its housing plan over the past five years. Key improvements include focused growth in transit and commercial hubs, street improvements, adoption of the Unified Development Code, rezoning to allow middle housing in traditionally single-family neighborhoods and standardization of the Multifamily Tax Exemption (MFTE) program. 

Moving forward, Almgren said the City is developing pre-approved plans for detached accessory dwelling units (DADUs) to streamline permitting and lower costs for homeowners. However, Almgren noted that the creation of a rental registry program remains stalled due to staffing and budgetary constraints.

Connect Lynnwood transportation report 

Public Works Director Jared Bond and City Engineer David Mach presented “Connect Lynnwood,” the city’s long-term active and accessible transportation plan adopted in 2022. The plan aims to build a comprehensive network for pedestrians and bicyclists of all ages and abilities.

Mach outlined the foundational concepts of the plan, emphasizing the need to transition the city’s public right-of-ways from being solely car-centric to “complete streets” that serve multiple uses. 

According to a public survey, Mach said the majority of Lynnwood residents are interested in walking and biking more, but are concerned about the safety of doing so. To address this need, staff are working to standardize street building codes and implement the principles of the Connect Lynnwood plan in long-term capital projects including the Scriber Creek Trail, 44th Avenue pedestrian improvements, Poplar Way Bridge and Northline village. 

For example, the City plans to replace a steep switchback path on 44th Avenue to the Interurban Trail with a more gradual and paved bicycle/pedestrian pathway. The future Northline Village Planned near I-5 along 44th Avenue will include a wide trail with a 5-foot buffer from traffic, connecting Lynnwood Elementary directly to the light rail station. 

Councilmembers discussed other infrastructure improvements, including a potential bike rack program and widespread protected bike lanes. However, there’s a massive cost associated with acquiring right-of-way to widen streets for bike lanes and racks, which staff said was a major hurdle for such improvements. The City currently relies on a mix of local funds and competitive state and federal grants to pay for improvements, according to City documents. However, these grants often require local matching funds, which the City struggles to provide under current budget constraints. 

“If you want a half-a-million-dollar grant to do some sidewalk improvements, you’re generally going to need another half a million to match it,” Mach said. “If we don’t have that, it’s hard to even apply for the grant, so there’s very limited transportation funding. I don’t want to be a downer in that, I just want to be open. This is the reality that we are in.” 

Staff said the Council will need to discuss additional funding ideas in the spring, specifically the Transportation Benefit District tax up for renewal next year. 

Mach also touched on introducing pay-to-use motorized bicycles and scooters to Lynnwood through companies like Lime. On Feb. 11, Mach said an estimated 59,000 trips were taken on these bikes and scooters in Seattle on the day of the Seahawks Super Bowl parade – equivalent to the daily traffic of Aurora Avenue through Seattle. 

“This isn’t just one or two people that will ride a bike for fun, but this can be a really important key part of your connectivity and your transportation network,”  he said. When preparing for major regional events including the 2026 Fifa World Cup games, local sporting events and the proposed Lynnwood farmers market, Mach said these vehicles could be beneficial for people travelling through Lynnwood. 

2026 Council priorities 

The summit concluded with a roundtable discussion to set the Council’s legislative priorities for the year. Following a voting exercise, the Council identified several key focus areas:

Pedestrian safety and traffic: Councilmembers prioritized exploring low-cost traffic calming measures, such as speed bumps and raised crosswalks, to address speeding in residential neighborhoods and along major arterials like 48th Avenue West.

Public space activation: Fostering community gathering spaces emerged as a top priority. Multiple councilmembers discussed turning vacant spaces into temporary places for community amenities. The Council talked about potentially reviewing permitting and zoning regulations to make it easier for food trucks, pop-up shops, and local entrepreneurs to operate in Lynnwood and test the market. 

To activate underutilized spaces, the Council discussed providing temporary infrastructure, such as seating, covered benches, and trash disposal, to create “food truck malls” or gardens on empty lots. They also discussed examining paid parking ordinances to manage congestion ahead of major regional events like the FIFA World Cup.

Human services and homelessness: Councilmembers stressed the need to address poverty and homelessness, advocating for the creation of safe parking or sanctioned encampment areas with hygiene stations for unhoused residents. The Council also explored child care program expansions and meal service for homeless people. Two councilmembers are serving on a coalition for early learning and child care, backed by a Department of Commerce grant, and plan to deliver quarterly reports to the Council on their progress. Furthermore, the Council is also in talks with staff at the Lynnwood Hygiene Center to directly address homelessness strategies. 

Low-cost initiatives: Councilmember David Parshall introduced a list of potential low-cost initiatives, including improvements to Lynnwood’s tree voucher program, hosting mobile Council meetings in different locations and neighborhoods, and creating “self-service” volunteer tool sheds for community members to help maintain City parks. 

Council President Nick Coelho said priorities identified in the discussion will be presented directly to the Mayor and city administration to begin scheduling Council discussion, workshops actions and policy decisions through 2026. 

The meeting agenda and recording are available on the City’s website.

— Contact Ashley at ashley@myedmondsnews.com.