2020/12/16 Council Agenda Packet

Report of the Everett Fiscal Sustainability Advisory Committee November 2020 Introduction The City of Everett is experiencing a financial crisis. After years of working to balance its General Government budget deficits with relatively minimal impact to the public, the City's ability to insulate its residents and business owners from this problem may have ended. The General Government budget deficit can no longer be bridged by deferring maintenance of city facilities, further reductions of the minimal remaining administrative staff, staff who are direct service providers, or implementing modest fee increases. Although the budget variance has been a major help in balancing the budget in the past decade, and will again help in 2022, it is volatile and is unlikely to generate nearly the savings needed to cover projected deficits after 2022. The onset of the COVID-19 pandemic has required two rounds of budget re -balancing efforts this year. The October 2020 announcement by Boeing that it will cease production of 787s in Everett has made the budget hole substantially deeper for the next several years at least. The City now projects that between 2022 and 2027 it will face an annual gap between revenues and expenditures equating to ten to fifteen percent of total General Government expenditures. The City's General Government operations include crucial public services: police, fire, emergency medical response, parks, street maintenance, library, and courts, among other programs. These services are fundamental to the quality of life and business climate in Everett. City leaders and the public must understand and acknowledge this crisis and be prepared to implement bolder measures. The Fiscal Sustainability Advisory Committee ("Committee') was convened by Everett Mayor Cassie Franklin in late June, 2020. The Committee was tasked to look beyond the 2021 budget and make recommendations for improving the General Government funding situation. The Mayor asked the Committee to respond to the following questions: • Does the City of Everett have a structural funding gap between expenditures and revenues? • What does a "fiscally sustainable" Everett look like? • What is your assessment of the work the City of Everett has done in recent years to cut services, implement efficiencies and explore new non -tax revenues? • Is the status quo "fiscally sustainable?" • If you agree there is a structural funding gap between projected revenues and expenditures, what strategies should the City further explore to address this in order to balance the City's budget in 2022 and beyond? This report sets forth our responses to the Mayor's questions. We begin with an overview of the process we went through as a Committee, then discuss the current fiscal challenge as we see it. We then present twenty-four (24) recommendations that we believe merit further exploration by the City. 1