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Source: LFP City 2027-2028 Biennial Budget
Document reviewed: City of Lake Forest Park, Washington — Preliminary 2027–2028 Biennial Budget (attached below). The City is inviting public comment on the proposed budget.
1. Executive summary
The central financial issue in this budget is the gap between the city's recurring revenues and its ongoing operating costs. The budget document acknowledges that the city continues to spend more on general operations than it receives from ongoing General Fund revenues, despite new revenue sources introduced in the previous biennium.
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PROPOSED TWO-YEAR BUDGET AT A GLANCE
Total budgeted revenues
$63.55M
Total budgeted expenditures
$69.71M
Beginning fund balance
$29.01M
Projected ending fund balance
$22.85M
Projected reduction in fund balances
$6.16M
Source: Budget Overview, page 9 of the document (printed pagination). Figures cover all 18 budgeted funds combined.
These figures indicate that the city plans to use approximately $6.16 million more in resources than it receives in budgeted revenues over the biennium. That does not automatically mean every city fund is operating at a deficit: the city has multiple funds, some with dedicated revenue sources and restrictions. However, the document separately warns that the General Fund's projected ending balance will fall below the city's minimum fund-balance target in 2028.
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The key questions are therefore:
- How much of the shortfall is recurring, rather than caused by one-time capital projects or other temporary expenses?
- How quickly will the General Fund's available reserves be depleted?
- Are the revenue assumptions and expenditure projections realistic over the next six years?
- What service reductions, additional revenues, or other adjustments would be needed to maintain financial stability?
2. The General Fund is the primary financial concern
The General Fund supports much of the city's day-to-day government, including police, administration, municipal court, planning, and other core services.
GENERAL FUND — 2027–2028
Projected revenue
$28.12M
Projected expenditures
$32.61M
Two-year operating gap
$4.49 million
Projected General Fund ending balance: $1.51 million, compared with the required reserve target.
Source: Schedule of Fund Balances, printed pages 48–50.
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The city's financial policies require the General Fund to maintain a minimum reserve equal to 60 days of operating expenses or 16% of estimated current-year revenues or expenditures, whichever is greater. The budget identifies the General Fund as falling below its required target by the end of 2028.
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Why this matters
The budget can be legally balanced using available savings while still having a structural operating deficit. Those are two different concepts.
- Budget balance: The city has sufficient total resources, including existing fund balances, to cover appropriated expenditures.
- Operating balance: Recurring revenues cover recurring operating expenses without continually drawing down savings.
- Reserve adequacy: Enough cash remains available to meet the city's financial policy and withstand unexpected expenses or revenue losses.
The proposed budget addresses the first condition, but the city's projections show problems with the second and third.
3. The six-year forecast raises the most important warning
The budget includes a forecast of General Fund balances extending through 2032.
General Fund ending balance forecast
Projected General Fund Ending Balance
Forecast balances for each biennium. Negative values indicate a projected shortfall in the General Fund balance.
Source: Six-Year Financial Forecast, printed page 170. The 2027–2028 figure here is $1.44 million; the separate fund-balance schedule reports $1.51 million.
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The forecast shows a progression from a General Fund balance of approximately $10.32 million at the end of 2023–2024 to a projected negative $8.34 million by the end of 2031–2032 if the modeled conditions continue.
The projections are not guaranteed outcomes. They depend on the city's revenue and expenditure assumptions, including inflation, healthcare costs, and anticipated sales-tax growth. Nevertheless, the forecast indicates that the issue is not limited to a single two-year budget cycle.
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What the forecast implies
- The current approach relies on savings. The city is using existing balances to support recurring expenses.
- The reserve problem develops quickly. The projected General Fund balance falls below the reserve target during the 2027–2028 biennium.
- Future adjustments will be necessary. Without additional recurring revenue, lower expenditures, or another material change in assumptions, the city cannot sustain the forecasted spending path.
The forecast should be updated as actual 2025–2026 results become available and the 2027–2028 budget is revised or adopted.
4. Revenue: not all city money can pay for general operations
The budget identifies the following major citywide revenue categories for 2027–2028.
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| Revenue category | Budgeted amount |
|---|---|
| Taxes | More than $21.6 million |
| Charges for goods and services | Nearly $18.3 million |
| Fines and penalties | More than $8.5 million |
| Intergovernmental revenue | More than $5.4 million |
| Licenses and permits | Approximately $1.9 million |
| Miscellaneous revenue | Approximately $2.5 million |
These figures are rounded descriptions from the budget overview.
A critical distinction is that citywide revenue is not the same as money available to the General Fund. Sewer and surface-water fees support their respective utilities; real estate excise taxes are restricted to authorized purposes; and certain traffic-camera proceeds are restricted to traffic-safety uses. The city cannot simply redirect all these revenues to pay for police, administration, or other general operations.
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The property-tax constraint
The mayor's budget letter attributes the recurring revenue gap partly to Washington's 1% limit on annual growth in regular property-tax revenue, alongside unfunded state mandates and rising service costs. The administration supports a voter-approved property-tax increase for existing city operations.
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The financial question for council and residents is how the city's ongoing costs compare with the recurring revenues legally available to pay them. That question should be examined separately from the merits of any particular revenue proposal.
Revenue assumptions worth examining
- Sales tax: The six-year forecast assumes growth in sales-tax-related revenues.
- Business and utility taxes: These are projected to increase over time, but the assumptions should be compared with actual collections.
- Traffic-camera revenue: The forecast assumes continued growth in General Fund traffic-camera fines, while school-walk-zone camera revenue is restricted to traffic-safety purposes.
- Investment income: Interest income can fluctuate with rates and investment balances; it is not a substitute for a sustainable operating revenue base.
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A useful next step would be to compare actual revenue collections for 2024–2026 with the proposed 2027–2028 assumptions, especially for traffic-camera fines, sales tax, business tax, and investment income.
5. Expenditures: where the pressure is coming from
The city identifies several cost drivers in its budget documents:
- Healthcare costs are projected to increase by 11–14% over the biennial projection period.
- Salaries and benefits are affected by negotiated labor agreements and compensation increases.
- Police dispatch and jail costs are increasing.
- Legal services and other professional services are experiencing cost pressure.
- Capital improvement projects are becoming more expensive.
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The largest citywide expenditure categories are public safety, at more than $16.3 million, and general government, at nearly $14.8 million, followed by utilities at more than $10.5 million. These figures cover the entire city budget, not just the General Fund.
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Staffing
The proposed budget authorizes 70.30 full-time-equivalent positions, compared with 66.15 at adoption of the 2025–2026 budget — an increase of 4.15 FTEs, or approximately 6.3%. The budget identifies four FTEs as fully funded through the Traffic Safety Fund.
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That distinction matters: a higher total staffing count does not necessarily translate into the same increase in General Fund costs. The relevant analysis is the net cost to each fund, including salary, benefits, overtime, and interfund charges.
Questions the council could ask
- Which expenditure increases are contractually committed, legally required, or necessary to maintain current service levels?
- Which increases are one-time expenses rather than recurring costs?
- How much of the increase in salaries and benefits is attributable to staffing changes versus compensation and healthcare costs?
- Are professional-services contracts reviewed regularly for scope, pricing, and opportunities to reduce costs?
- Do new capital projects include realistic estimates of future maintenance and operating expenses?
These questions help distinguish unavoidable cost pressures from areas where the city has discretion.
6. Capital projects and debt
The preliminary budget includes approximately $17.55 million in capital improvement projects for 2027–2028, with approximately $9.32 million in projected 2027 costs and $8.23 million in 2028 costs. Major projects include the SR 104 and 40th Place NE roundabout, lakefront park development, sewer lift-station work, culvert replacement, and street and pedestrian improvements.
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Many of these projects use dedicated utility revenues, grants, transportation funds, or other restricted resources. Their total cost should therefore not be treated as if it were all competing directly with General Fund operating expenses.
The budget also recognizes a $2.5 million loan from the Transportation Improvement Board to help fund the roundabout project. The debt section reports that the city's existing outstanding debt was below 1% of its stated debt capacity, while noting that the additional loan supports this capital project.
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The financial review should consider both project funding and the future cost of maintaining completed infrastructure. The city's financial policies require incorporating maintenance and operating costs for new capital projects into operating budgets once those projects are completed.
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7. Utility funds have their own financial pressures
The General Fund is not the only area to watch.
| Fund | Budget issue |
|---|---|
| Sewer Utility | King County wastewater treatment costs are projected to rise 12.75% in 2027, with another 10% proposed for 2028. The city proposes 5% annual sewer-rate increases. |
| Surface Water Utility | The budget includes a 10% rate increase for each year to support ongoing operations, permitting compliance, and future capital work. |
| Street Fund | Declining right-of-way permit revenues and inflation are creating operating pressure; General Fund transfers help support street maintenance. |
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Utility rates need to be assessed against the full cost of service, including treatment charges, operations, capital projects, and reserve requirements. A rate increase may improve a utility's finances, but its adequacy depends on the actual cost trajectory and customer revenue.
8. What the budget says about the city's financial choices
The mayor's letter states that several potential expenditures were excluded from the preliminary budget to limit the General Fund deficit:
- Increasing the Public Records Specialist to 1.0 FTE, estimated at $32,000 per year.
- Adding a Facilities Maintenance Specialist, estimated at $97,000 per year.
- A City Council strategic-plan update, estimated at a one-time cost of $50,000.
The letter says the administration would work with the council to identify service-level reductions if the November 2026 ballot measure is unsuccessful.
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This makes the trade-off explicit: the city is attempting to maintain current services while relying on savings, and the preliminary budget does not include all identified staffing and planning needs.
For evaluating possible changes, council could request a side-by-side analysis of three scenarios:
- Current-revenue scenario: Maintain existing revenue policies and identify the timing and scale of required service reductions.
- Additional-recurring-revenue scenario: Show how new recurring revenue changes the General Fund balance, reserve compliance, and long-term forecast.
- Expenditure-adjustment scenario: Identify recurring savings by department and service level, including operational consequences and implementation timing.
Each scenario should use the same economic assumptions and distinguish recurring changes from one-time funding.
9. Recommended questions for the budget review
These questions are directly tied to the risks identified in the document.
Budget review checklist
What is the exact General Fund reserve shortfall at the end of 2028, and how is it calculated under the city's 16% policy?
Can staff provide a year-by-year General Fund forecast through 2034, with and without proposed new recurring revenue?
Which expenditure categories account for the largest increases compared with actual 2025–2026 spending?
What assumptions support the projected growth in traffic-camera fines, sales tax, and business tax?
Which revenues and fund balances are legally restricted, and which are available for general operations?
What service reductions would be required if additional recurring revenue is not approved?
How sensitive is the forecast to healthcare costs, labor agreements, inflation, and slower-than-expected revenue growth?
What are the projected operating and maintenance costs of capital projects once construction is complete?
Overall assessment
The preliminary budget clearly distinguishes between short-term budget balance and long-term financial sustainability. The city projects a $4.49 million General Fund revenue-expenditure gap for 2027–2028, an ending balance below its reserve target, and negative General Fund balances in its out-year forecast if the modeled conditions persist.
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The most consequential part of the review is not simply the size of the total city budget. It is whether recurring General Fund revenues can support recurring services while preserving the city's required reserves.
Before final adoption, the most useful additional information would be a detailed, year-by-year General Fund forecast that reconciles the different ending-balance figures in the budget, identifies the assumptions driving the projected deficit, and quantifies the effects of alternative revenue and expenditure scenarios.
Projected General Fund Ending Balance
Forecast balances for each biennium. Negative values indicate a projected shortfall in the General Fund balance.
| period | balance |
|---|---|
| 2017–18 | 4,078,519 |
| 2019–20 | 4,812,962 |
| 2021–22 | 7,879,903 |
| 2023–24 | 10,316,028 |
| 2025–26 | 5,998,911 |
| 2027–28 | 1,437,948 |
| 2029–30 | -3,311,023 |
| 2031–32 | -8,341,824 |
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