City Council - Regular Meeting

I have 6 p.m. So let's get started with the City Council meeting for July 27th, 2026. We'll call this meeting to order. And I'll note the presence of six council members sitting here. And do we have a seventh online?

Yes, we do.

Yes, we do. All right. Thank you. All council members are present. Let's begin with the Pledge of Allegiance. I pledge allegiance to the flag of the United States of America and to the Republic for which it stands, one nation under God, indivisible, with liberty and justice for all. All right. Thank you, everybody. We have some announcements tonight, so we'll get those started here, and then we'll go to some committee reports. Okay, first of all, just a brief update, not a lot of detail, we like to be cryptic here, but the next phase of the 12th and commercial intersection update will start sometime in mid-August. As I think some of you know, what's going to be happening there is they're going to be replacing the signaling equipment, the actual traffic signals with new, modern, magical traffic signals that will improve performance at that intersection. They'll also be doing some curbing, and they will be fixing the hump at 11th Street. Look forward to that. We're not giving you a precise date because we don't know when that quite will begin, but it will be sometime mid-August, and it may be up to six weeks. And the intersection should not be closed at any point. It will largely be able to be completely open and just partially closed in some circumstances. Okay, we are looking for more candidates for a couple of boards and committees, the Arts Commission, the Housing Authority, and the Library Board of Trustees. If you're interested in any of those or any of our other committees, please go to anacorteswa.gov slash 1306 and apply. If you've got any questions about any of those committees, please let me know but you know we're looking for candidates for committees all the time these are the three that we have open right now but you can put your name in for later selection because we do have vacancies from time to time We have a new page on our website about property taxes and how property taxes work. You can go to anacorteswa.gov slash taxes and learn more about that, including about the fact that we have almost the lowest property tax rate in Skagit County right here in Anacortes. We're just a couple cents higher than Burlington. But go ahead, take a look. Anacorteswa.gov slash taxes. Property taxes are more complicated than everybody thinks they are and so we wanted to put out some information about that there's also a link there on that site to a eligibility questionnaire for the senior and disabled property tax exemption program this is a new interactive questionnaire that was developed by the skagit county assessor you no longer have to navigate everything in order to figure out if you qualify for that program go to this website click that link and find out if you actually do qualify for that because that is different from the deferral program. You actually get an exemption from property taxes if you qualify, so check that out. The library is having a couple of events here in August that they would like us to tell you about. First of all, during the Arts Festival, there will be a jazz stage. So downtown here, not at the library, but downtown during the Arts Festival, they've got jazz being brought to you by the Meniere Jazz Endowment. So check that out. There's a teen trivia night at the library on August 11th. There's a session on AI and how AI can be made simple. for anybody on August 12th, and then there is a children's program break where there won't be children's programming August 17th through September 13th. More information at anacorteswa.gov slash library. The Arts Festival, as mentioned, is this weekend, so we hope to see you out there. Starts on Friday. Friday is kind of locals day, so come on out on Friday, July 31st, and it'll run through Sunday. National Night Out is August 6th, Tuesday, August 6th, from 6 to 8 p.m. That is a great event at Storvik Park. The police department hosts this, and we've got a number of community partners out there. It's a great opportunity to get to know the rest of your community and the public safety officials that serve you. So please check that out, August 6th. And that concludes those announcements. Let's go to committee reports. Who wants to do the finance committee report?

mayor walters ms malton the finance committee met on july 23rd last thursday and all of us were remote for various reasons but we met with um ms peck and mr hoagland and we got a great preview of the budget presentation that we'll all be seeing tonight I was very impressed with the slides and the way the information will be presented. And so I'm not gonna belabor this report with all the details about what we will see in just a little bit. There were a couple of things that did stand out to me. One was that building revenues are 51% of expected so far. But just to be noted that we knew that they were going down and they're 9% lower than the 2025 actuals, the budget is. So some of the numbers in the 2026 budget have been reflected to reflect. some of the lower numbers that we've been seeing year over year over the past three to four years so we'll have more detail about that um and that was about it for the finance committee okay thank you uh library and museum committee mayor walters miss hunt

Council members Currier and McDougall and I met with museum director Brett Lunsford in a hybrid meeting last Thursday. Mr. Lunsford provided an update on the museum department's many cultural tourism initiatives as the summer heats up and all our visitors are here now. So you can all feel that happening. Staff are still compiling the Q2 visitation stats, but visitation appears to be up to all the museum staff. facilities in spite of the reduction in open hours due to the 2025 staffing cuts. Mr. Lunsford attributes this, in part, to the very popular Anacortes music exhibit at the Carnegie Library, which I cannot praise enough, fantastic, features many of our staff members, as a matter of fact. And the general increase in people moving in and through the Maritime Plaza, now that that's been expanded. The Maritime Heritage Center, because that's the building that's open all the time, is effectively serving as a welcome desk for that whole zone now, and we appreciate museum staff providing that service. We also discussed how the successful cultural tourism initiatives in Anacortes fit in with the larger demand being seen throughout Skagit County for authentic visitation experiences. People want to see how real people live and work and have lived and worked in the past in places we aren't familiar with. So we're fitting into a larger trend there and we're doing it very successfully. We also discussed how the museum's extensive collection of photos, documents, and artifacts essentially forms the cultural infrastructure of Anacortes. Our museum staff are the stewards of that infrastructure. It has been truly humbling to me to tour the full to capacity storage rooms in the Carnegie building and witness the physical legacy of generations of generous Anacortes residents and businesses, all of which is stored and preserved and cataloged and made available by our museum staff. I'd encourage each of my colleagues on the dais, if they haven't already, to set up a time with Mr. Lunsford to tour the back rooms and appreciate the scope of that resource and our responsibility to the many donors in our community and to our future residents to maintain that collection.

Thank you, Ms. Hunt. All right, we have Public Safety Committee up next. Who has that report?

I don't hear Ms. Cleland-McGrath, so I will offer Mayor Walters.

Ms. Hunt?

Ms. Moulton, Ms. Cleland-McGrath, and I met with Chief Floyd and Chief McDonald on last Tuesday. Chief McDonald updated us on procurement details for the new fire boat. We discussed what the boat will be used for, which is both to respond to marine fires and to emergency medical needs on islands within our assigned EMS service area. And we also discussed how the boat will supplement the Guaymas Ferry as a means of providing emergency medical services to Guaymas Island. We discussed the need to establish a means of billing for EMS transports by that boat when it starts doing that. That's not currently contemplated in the billing rates established by Skagit County EMS. Chief McDonald also alerted us to the contract modification for the Fire Station 1 remodel, which we'll deal with later on the agenda tonight, so I won't belabor that. Chief said that interviews are underway to fill some vacant firefighter vacancies. EMS personnel and that the assistant fire chief position was expected to be posted very soon And I checked before this meeting. I don't see it live yet, but soon Then we talked with Chief Floyd about to review the final edits on ordinance 503 to the e-bike ordinance and which is also going to be on tonight's agenda later, so we won't talk about that anymore right now. I do just want to mention helmets. Helmets are something that we will talk about when we talk about the ordinance. We did inquire of both Chief Floyd and Chief McDonnell if their departments still offer bike helmets to children who need them. Both those departments have at various times had helmets available through different state and local grants. And both departments are currently looking for new grant opportunities that would resupply them. And I think we are onto a few of those. So we will provide you with more helmet information as we get closer to open streets at the end of August.

Mayor Walters.

All right. Thank you. Mr. Young.

Could I add to that? You know, every once in a while, I don't know how you guys feel about it, but every once in a while, the Catholic Church has their big sale twice a year. I know because my spouse works it regularly. hard. And so sometimes there's an enormous amount of bike helmets there, too. And so it may be just another way in lieu of recycling. Great helmets, they really the church goes through this tremendous amount of effort to make sure that everything that's there is generally working all of the watches have batteries in it wound up it won't be put out in the helmets you know that I see there among everything else it's really been in great shape so that may be another avenue in lieu of additional grant dollars thank you Mr. Young any other council members have announcements or some committee reports that I missed

Alright, hearing none, we'll go on to public comment.

Oh, council member. Sorry, Mayor Walters. Hi, I just wanted to do a quick report right before this. I had the. North star housing task force. uh committee meeting and we discussed somewhat about our three-year plan for northstar there is currently a survey that can be taken i think northstar has sent it out to all council members i think it's also available to the public but please make sure to fill that out they're spending the next couple months working on gathering that information and then we'll process it through and hopefully come up with a plan before the end of the year so just wanted to put that out there

Thank you, and I'll ask Ms. Tottenham to find that email and forward it to council again so that you have it at the top of your inboxes. All right, now we will move on to public comment. We have one person signed up, and that's the name I will call on first. But then anyone else is welcome to step forward as well. You have three minutes. Please state your name and where you live and adjust the microphone. So we'll begin with Pat Gardner. Good to see you, Pat. I haven't seen you recently. I was thinking about you the other day.

Good evening.

Nope, nope. No buttons to press.

Okay.

You're ready to go.

Good evening, Mayor, council members, Pat Gardner, Anna Cordes. On the first part on the open streets, I've gone down there, come to it every year, and I sit and watch the unruly kids on their bikes. and parents are just oblivious to it. And I had mentioned before some sort of, maybe on one of the streets, a training or some sort of rules of the road bicycling. You know, you cross an intersection. This is where they could practice. You come to an intersection, you slow down, you just don't whip through and run over pedestrians. But I think some sort of I don't know if we have staff to do such a thing, but it would be nice to get a few volunteers out, and maybe in one area, for some sort of guidance for some of these kids, because the parents that I have seen aren't doing it. But anyway, thank you for your time.

Thank you. All right. Anybody else for public comment? Okay, seeing none, we'll close the public comment period. And now we'll move on to the consent agenda. We have four items on the consent agenda. Council. Council, do you have a motion?

I move to approve the consent agenda items as presented.

Second.

A motion and a second to approve the consent agenda. Hearing no one asking to pull any items from the consent agenda and no discussion being allowed on the consent agenda, we'll proceed to the vote. All those in favor of approving the consent agenda say aye.

Aye.

All those opposed say no. The ayes have it. The consent agenda is approved. Okay, that brings us to our first item of other business, which is our e-bike policy. Chief Floyd will introduce this item. This is the second read. We will take some public comment before Taking any action on it.

So chief Floyd take her away Thank You mayor good evening council members and rooms of the audience So I first want to give credit to this slide to miss wet them and who sent that to me earlier today and thought it was important to note that the juvenile seagull is wearing a helmet with a properly fastened chin strap and it appears to be traveling less than 15 miles an hour.

It's weird how our city attorney makes the best slides.

the best animal slides, for sure. So this is, as you mentioned, our second read, so round two. And noting that tonight's council agenda has potential to be lengthy, I just did a few quick slides to help bring the changes that we made from the last version that you saw to this version. Under applicability, we reference the AMC chapter for the community forest lands and that any operation of these vehicles in the forest lands will default to the language that's currently in the chapter regulating forest land use.

You might need to click on the slideshow.

Okay. A few changes under the definitions. So we clarified definitions using associated RCW references. We also added a definition for electric personal assisted mobility devices using the definition for that. That's under RCW 4604-1695. We also had a lively discussion on the definition of shared use path and what trails in the city that should include, whether it be the Thompson Trail exclusively. Do we include the Greenwich Channel Trail, Rotary Trail? And I suspect some of that discussion tonight will help us figure out where we want to end up in the end, but... there was all of the above that were considered. Since those are improved trails, they're paved, and we see a variety of user types on those trails. For motorized vehicles, we have a speed limit of 15 miles an hour, except on city streets. And We have the same for non-motorized vehicles. That's really the highlights of our changes. Beyond that, everything largely remained the same with the version that you saw previously. So with that, I'm available for any questions you may have.

Council, do you have any questions at this point?

I want to see you know, I just wanted to acknowledge the e-mails that came in concerning at least to me about motorized versus non motorized where versus we're not and until I just want to say I read them all and so I'm prepared to move forward with this piece here.

payments to you mayor walters this frantic yes uh... thank you so much uh... i think the thing about this is it's so new for all of us i think that we're gonna put something in place now that i'm sure in six months from now a year from now there's going to be a new bike of some sort that we're going to have to adjust for. But I think it's a really great starting point. One of the things that I see when I'm looking at places that are putting this in play all over the country that are having success with it is all about education and positive reinforcement has has shown so it's it's something as simple as i think one place i saw the police officers give out uh... ice cream tickets like free lake i know this might sound ridiculous but i i think this kind of stuff works on kids positive reinforcement like they give out like maybe you know ice cream to kids that they see following the rules right positive reinforcement so i'm just wondering do we have any kind of like other than saying that we have this now do we have any kind of formalized education like i know a lot of times we say that hey we want to partner with the school district and go up there and talk to them because i think that like for this to be successful the outreach part is going to be really important so i'm curious if we have any of that now and if not once we pass this How would you suggest that we go about making some of that outreach happen?

So not directly related to this, but is adjacent to... I contacted a number of middle school age kids today out on motorcycles that... is regulated under the RCW, not this proposed ordinance specifically. And in that discussion with those individuals, I gave them the alternative places where they can ride. I talked with parents and educated them. One of the parents made a comment that, you know, the motorcycle use in the forest land trails is restricted to certain times of the year, it'd be nice if there was a designated area where these individuals could go ride and not be violating RCW or city ordinances. So I think working with the community, if there is the demand for that, is probably an incentive. I don't currently have an ice cream sponsor for a project like you're talking about, but... I think it's offering an alternative is our best chance for success.

And I'm totally in favor of it. I just want to make sure that once we do it that we continue to look for ways to teach the kids and educate the kids about this. And thank you for the work. And I thought the Public Safety Committee did an excellent job vetting this out. So thank you.

The point is well taken. And there will be a significant amount of work that we'll need to go into. signage and advertisements and social media campaign. And we are aided in that by making this ordinance relatively simple because it's pretty difficult to explain to people that a class one or a class two or a class three have these different rules in these different areas. And that's largely not present in this draft. So assuming that this is what gets adopted, I think our work will be aided there. Certainly, it will be a big difference from the existing law if helmets are required in the final ordinance, because that's not what is currently required. But maybe that's one of the most important things in here. So we will have our work cut out for us, but we intend to do a good job on that. Any other questions for Chief Floyd? Otherwise, we could do discussion or I could go to the public for comment.

Mayor Walters.

Ms. Hunt.

Could you put the slide back up with the 15 mile per hour speed limit where we just were? Thank you. So one, the only question I have about changing, potentially changing text that's in this draft, I had a constituent ask me if that limit to 15 miles per hour except on a city street means that if you are on Oaks Avenue on the shoulder or in a bike lane, you have to go 15. I said no, our intention is that if you are on a city street, inside any painted lines or on the shoulder, you go the posted speed limit. But is that not what our language actually achieves? Do we need to make it more specific?

There is a definition of street in the ordinance, meaning the entire width.

My interpretation would be the same as Ms. Hunt's. That bike lane or shoulder would be considered part of the city street, and we would not expect them to follow the 15 mile an hour speed limit on those areas.

As long as it's clear. It specifically says includes any designated bike lanes on the shoulder.

Fantastic. Thank you.

If no one else is chomping at the bit right now, let's go to the public for comment. Does anyone here in the room want to provide comment? Pat Gardner, come on up. Come on down.

Good evening. Good evening, Council and Mayor Pat Gardner and Cordes. I don't know where to begin. We have all ages on these motorized vehicles or contraptions, whatever you want to call them. And I'm wondering about training. Now, you go, this is a little different, but you're going to Mount Vernon, you see that motorcycle training program. placed by the Ford place there on that big field or lot. Is there something, somewhere we could have an all-age training of, not just training, but the rules of the road or the safety features? Be sure you have your helmet. Or if you're at night, you've got something bright on. I mean, I've... I've almost been broadside by one of these little kids on one of these little wheelie things. But there's some sort of training. The parents, some parents know, but there are some parents that are oblivious to it and they don't know what their kids are doing out there. And they buy them these things and say, go play. And it's not fair to them. If they get hurt, who are they going to holler at? So I'm thinking if we had a field or a place where we could have some instruction, a little training of, depends on what, if you want to go with the high school kids or the junior high or the little tiny tots, but there needs to be some training. Because I have seen some, and I think we all have, seen some fancy writing that i never did i never got away with that when i was a kid but it's just i think training is important because the parents aren't always doing it thank you thank you uh yes mr nyhart why don't you come on up mark nyhart ward two um my only concern is first of all it's great that

We have an ordinance. There are issues with these, so thumbs up for the city and the police department for working this. My only concern is on the trails. When you have bikes, you have people in walkers, you have this and this and that. I don't know how it's going to be manageable to have that mixed use of people on some of those trails. In particular, the Tommy Thompson Trail, it's kind of a commuter thing, kind of. If the Guemish Channel Trail goes from where it is now all the way into town, it'll be used for some kind of commuter traffic. But, yeah, bicycles... especially the e-bikes and now these little motorcycles. But we also have seniors there that walk that trail, particularly the Guemist Island Trail, well, and Tomington-Hompson. So my concern would be, how do you work that out? And then the second piece that Mr. Fantini talked about is, or actually somebody else, I think it was, alternative places don't make that the ACFL. to ride those electric small motorcycles or anything else. Find someplace else other than ACFL. The Parks Department did a good job of trying to manage that, but once you get those kids on those small electric motorcycles, we've got a nightmare.

Anyhow, thank you. Thank you. All right, I don't see any other hands in the audience here. Do we have anybody online? Okay. And just for clarity, Council, motorcycles, including the e-motorcycles, aren't allowed per this ordinance on the shared use paths, but the e-bikes are. Council, do you want to engage in further discussion at this point? If not, you could make a motion. Or even if you do, you could make a motion, and that could set the stage for discussion. Mayor Walters? Mr. Fantini?

Me down here. As this is our second read of this, and I think all of us could sit here and talk and keep parsing this, but I think the best way to move forward is to put it into play and then start seeing the results. So with that, I move adoption of ordinance 5032, repealing AMC 10.38 motorized scooters and replacing it with the new chapter AMC 10.38 personal transportation devices. Second.

Motion and a second to adopt. The ordinance has presented further discussion.

Mayor Walters.

Ms. Moulton.

I just want to mention two quick things. For the last 10 or 15 years, the middle school has had a Safe Routes to School program, and that's been very effective about teaching kids safety. who then teach their parents safety and the importance of wearing helmets and behaving well on bikes. Of course that doesn't touch everyone, but it touches a lot of people and it's been very effective. I also wanted to mention about all the different users on our trails. We've done a really good job as a community in the forest lands and on our shared use trails. in being able to accommodate all different kinds of users. The Forest Lands is a great example of that. We have hikers, dog walkers, runners, bicycle riders, and motorcycles even. And it's pretty remarkable how well we do do. And there will always be some people who do not do great and make it hard for other people. But I feel like it's like that on the roads that we drive and it's on the sidewalks that we walk on. And when you have people you have, sometimes you have conflicts. But I'm confident that this will help us increased safety in town especially for kiddos especially with the helmet requirement and the chief floyd and the apd are going to do a great job at reaching out and we all will and these kiddos will tell each other and these parents will tell each other so i feel like we're going to have a really good network but of course there will be room for improvement but i'm very much in favor of this ordinance and thanks to everyone who worked on it thank you mayor walters miss kalina mcgrath

Thank you. Yeah, I just wanted to add the fact that, you know, the goal of this ordinance is to give our police department and the public a little bit some more reassurance and some tools to have positive reinforcement. I think that the education is key, the and the ability to teach elementary school kids especially is important at that age before they even get to middle school, but also to give the principals and teachers the tools to say, hey, this is really important. There are rules that you need to follow and these are the rules. And really our goal is to make sure that we can share those paths safely and that people, students and adults can get around safely. When we were at the AWC convention, there were a variety of ideas, whether it's Some kids would go and meet with the police department and get a pamphlet about how to ride safely, and they get a sticker on their bike. I think there's a lot of opportunity to do outreach, and we are lucky enough to have a police department that has reinstated their bike patrol, so that is also another opportunity to have just positive interactions with community members. I think it's not just kids. It's also adults who haven't been well-versed in how to navigate either on these shared paths or with vehicles. So I'm really excited about this first version passing. And yes, I agree that there probably will need modifications, but we were trying to really focus on behavior versus specific classes. And I think that this does a pretty good attempt at solving that or addressing it.

Thank you, Mr. Cleveland-McGrath. Mr. Young?

No, I just wanted to add to my colleague's comments. You know, we spend a lot of time on youth, and I think it's important for the next generation to understand the standards, the norms, the things that we hold near and dear in our society. It's one of the things that also helps us to recognize others' contributions but also at the same time create an opportunity for evolution, if you would, about processes as we go forward. I'm a big advocate for youth, but I'm also an equally big advocate for the adults. because we in Anacortes have a large population of very active adults that are trying new things, biking, hiking, boating, and it's amazing. It's one of the strengths of our town and one of the beautiful things that makes our town so wonderful in that those adults also help us create the forest lands by make those donations or go to one event or another. So I really, really, really appreciate that. Thank you.

Thank you, Mr. Young. Any other discussion?

Mayor Walters.

Ms. Hunt.

In response to Mr. Neihert, who made some good observations, and Ms. Moulton, we already have the shared use. It's already happening. We're not allowing something new We're just putting some guardrails up. And it's easy to focus on a 15 mile per hour speed limit, but the most important parts of this ordinance are that you can't ride in a manner that endangers someone or without yielding to pedestrians, no matter who you are. Our esteemed colleague, Councilmember Emeritus Erica Pickett, has often told us that the safe and appropriate speed for any wheeled vehicle to overtake any pedestrian is the same speed the pedestrian is moving at. You make contact, Mr. Young suggested a bell, or you holler or say good morning, whatever you want to do. You do not pass at 15 miles an hour. And that's what we will model, those of us who are out there on two wheels, and we will continue to educate the kids and our fellow adults. I'm also just going to put in a plug. I mentioned several people asked me about the helmet law. Why only kids? We're going to let adults make that choice for themselves. But I am here tonight because when my bike hit a vehicle and my head hit the asphalt, my helmet cracked open and my skull did not. Wear your helmet every ride. And if you care about somebody else's head, make sure they're wearing a helmet.

Thank you, Ms. Hunt. Council, are you ready for the vote? No objections. I'll proceed to the vote. This will be a roll call vote. Mr. Franciak, would you please call the roll?

Mr. McDougal? Yes. Mr. Fantini?

Yes.

Ms. Hunt?

Yes.

Mr. Currier? Yes. Mr. Young? Yes. Ms. Cleland-McGrath?

Yes.

Ms. Moulton?

Yes.

Mayor, the ayes are seven, the nays are zero.

Thank you, Mr. Franciak. Thank you, Council. The ayes have it. The motion and the ordinance is approved. Council, I really appreciate your embrace of this ordinance. Council Public Safety Committee, thank you for taking the bull by the horns and getting this drafted and getting this done. Thank you to Chief Floyd. Thank you to the legal department, including Liz and the legal department, for your assistance on this. I am ever so glad that we have gotten this done, and now it is our task to roll this out before we have a fatality. as the result, or a serious injury, as the result of inappropriate behavior with some of these personal transportation devices. And so we all have a large responsibility to model the right behavior, as has been talked about here tonight, and especially for parents, because this ordinance is not directed solely at kids, but obviously it's one of the big reasons that we have taken this up, and it's those that we are really trying to protect here. All right, with that, we'll move on to 6B, which is our contract mod for the A Avenue landfill investigation. Mr. Lunsford, go ahead.

Thank you, Mayor Walters, council members, audience members. So I was here not too long ago with the previous contract mod for the A Avenue landfill. In that time, my last appearance, they started the remedial investigation at the site. And they ran into a small problem when they were trying to dig or bore through to create the groundwater wells. Just to remind you where I'm talking about, the A Avenue landfill is in the community forest lands off of what would be 37th and A Avenue. Trail 10, if you're a forest lands user, that's adjacent to the landfill. On this map, if you'll work with me starting at the top at about midnight, 12 noon, whatever you want to do, is site number one. That's the blue dot. there, going to about 3 o'clock, Site 2, 3.30, 4 o'clock, Site 3, and 5 o'clock is Site 4. So those are relative to the landfill starting in the north, moving around the east to the south. And those are the groundwater wells they want to dig, bore. They couldn't do that last time because the apparatus was not able to penetrate to the layer. So I'll just fast forward and come back. So everything in the remedial investigation is happening except the groundwater sampling because they haven't been able to establish that. Soil sampling, the seep sampling, delineation is ongoing. And I'm coming to you tonight to try to bring this to you regarding the sonic drill rig. So the mod is for 25,100. The work date would start in September of this year. Target depth is 20 feet. Maximum depth would be 35 to 40. So if we go back... to the map on sites two, three, four, they were able to get seven-ish feet, nine feet max. They need to go to 20 at least. That's their belief based on the geology that that's where they'll find groundwater. They could find it as deep as 35 to 40. That would be their max depth.

Mr. Young?

No, just a quick question, Mr. Lunsford. With the first borer, if I can call it that. Well done, yes. Okay, thank you. It wasn't able to penetrate, you said, to the length that they needed to. This second piece of equipment and part of the need for these additional dollars is a bigger, stronger piece of equipment?

Thank you. That's a great question. It's a different piece of equipment. So a sonic rig uses – so that was a geoprobe that failed. It just pushes through and tries to push things aside. The sonic rig uses sonic technology, which I do not know very well, but I'm sure the Internet could inform you of that. Right. And uses that to essentially cut through. So it can go through concrete, whereas the previous apparatus could not. So they start out with the, based on their research, and no one has really drilled here, so they were going in a little blind, but doing their best based on the geology that they knew. And so they could not bore through, so now they're going to essentially have to cut through with this new technology. So the rigs, look like this. So they have to have a horizontal clearance, about eight feet, and then a vertical clearance to do the work. So on three of these sites, so I keep moving back and forth, sites four, three, and two, they believe they can get that clearance to get there. So if you've been on the trails, it's rather wide. It's part of a gravel road and a larger access trail here on trail, what we call 108. So they think they can do that quite easily. It's when they get to site number one in the north here. that they have a problem getting down the trail and then the elevation because they don't want to make a road and they don't want to cut trees. Got it. They know this will be a problem. They believe that this apparatus can cut through to the necessary depths and they believe that can happen in the three sites. In the fourth site they'll just have to determine when they get there. There's a clause in the agreement with the state that if we run into this kind of problem, we can adjust it in the field and have that discussion and find out what Equality would like us to do at the time.

You've answered my question because I guess I was just looking at the largeness of the piece of equipment the second time around and trying to figure out how we would sort of get it through and where it needs to be. So this is a necessary thing.

Yeah, it may not be this size. They have much smaller rigs, but they all have a vertical requirement. And so the last one we have is about eight feet wide. And if you can imagine those trails, some of them are quite narrow. And so they'll do their best to get out there. That's their goal.

I appreciate you anticipating as much you know you you tend to in your presentations among others but in your presentations you anticipate the possibilities and you break those into the agreement which is thereby in many instances protect us as a city and allows us to save money just through well thought out agreements coming forward so thank you.

Well, thanks to Ms. Swetnam and the Anchor QEA team for helping to put that all together. I'm just the humble messenger.

Mr. Lansford, do you have more slides?

That's my last one. Mayor Walters.

That's how we know we're at the end. Mr. Fantini.

Thanks. Sorry. Yeah, I was waiting to see you. I don't have a lot of questions right now because I have a million questions. So I am going to say. if possible and maybe this is just because i feel like as i look at this this is one of these projects that we have spent a lot of money on and i don't know where the end is of the project so one thing that would be helpful for me and i think there are other council members who've been up here a lot longer that i think have a lot more information so i i'm not saying that the information hasn't been given but for me i would love to get together and have kind of like a soup to nuts on this project because it's a lot of money and I don't know where the end is.

I think that, so it has several phases. You know, the greed order was essentially the contract. The remedial investigation is investigating what's there on site, gathering groundwater, soil, seep samples, delineating the size of the former landfill. And then based on that information, then they'll enter, is it the feasibility, Ms. Swetnam, the feasibility study, is that what that's?

Right, so they'll do this remedial investigation to characterize the site and see if there are contaminants that actually need to be addressed through a cleanup process. And then the feasibility phase is to look at what those alternatives are, what cleanup levels are required, what the pathway is. So we don't know at this point where it's gonna end up. It may be that the result of the remedial investigation Reveals that there are not contaminants that need to be addressed through cleanup process And then we report that and we work with ecology to close it out But it really in this case is going to be this remedial investigation process that's going to determine what the project's going to look like and one thing I wanted to mention as well because I think you're probably looking at the agenda bill that shows a high dollar figure and That amount is for this contract for Anchor QEA, which also included the work on the water treatment plant demolition project. So that dollar figure was not all on this particular project. That was a much more expensive cleanup project. But I think we can certainly... work with anchor and we can come up with a good more comprehensive update for council on where this project is in the process and kind of go back through that life cycle of a mock cleanup project with ecology and give council a kind of a rerun on that.

Yeah, because I think for me, it's like that totally makes sense. So it sounds like this is what we need to kind of get the information we need to make the decision on next steps. But all of that would be really helpful to know when we're making those next steps. So anyway, thank you. Sorry.

Oh, thank you. That's a great question. Thank you, Ms. Whitnam.

Well, I don't know if council really needs that because there is a concise 322-page remedial investigation work plan available for your reading pleasure on the project website.

That's true. Thank you, Mayor. That's true.

Council, but Mr. Young.

Short of any other conversation about it, I move that the city authorize the mayor to sign a modification contract 21-024-LEG-001 with anchor ea llc in the amount of twenty five thousand one hundred dollars increasing the total contract price to two million nine hundred and seventeen thousand three hundred and seventy six dollars second all right we have a motion a second to approve the contract amendment as presented any further discussion

Hearing none, we'll move to a vote. All those in favor of amending the contract say aye. Aye. All those opposed say no. The ayes have it, and the contract amendment is approved. Thank you, council. Our next item, 6C, is contract mod for the Fire Station 1 remodel project. And Chief Mannix-McDonnell is here to present that item. Go ahead, Chief.

Good evening, Mayor. WELTERS AND CITY COUNCIL, MEMBERS OF THE PUBLIC, CHIEF MCDONALD AND THE COURT OF SPIRE.

CHIEF, GET CLOSER TO THE MIC AND FEEL FREE TO ADJUST IT.

So Station 1 was built back in 1993 and just recently we decided to go through a remodeling project and then construction began in May of this year and shortly after the demolition several unforeseen conditions were discovered that required changes to the scope of work Items that had not been anticipated during the design but were required to complete the remodel as intended. Examples of those were, for example, the sprinkler system had to be extended and some of the sprinkler heads had to be modified to reach all of the different areas of the spaces that were opened. There was a chase that was no longer used that was opened up to increase office space. One of the exterior doors had to be increased to 36 inches. We had to relocate gas, vent, electrical and data lines. And another unforeseen condition was when the surface had been removed, the subfloor was not the appropriate build for the new flooring material that we were going to put down and that we needed to be guaranteed of its longevity by the contractor. All of the work was fully documented, including the scope, the materials, any subcontractor costs, and permits needed, all of which were necessary to complete the remodel safely and correctly. The total cost of these changes totaled $29,771.37, which increased the total contract with Laser Construction to $290,715. and 81 cents. All of the costs, both the original project and the additional work, were to be covered by 90% of fire impact fees and 10% of EMS levy funds, which would come out of the general fund. The remodel supports our second engine company that is staffed at Station 1 and the Battalion Chief Unit by improving kitchen and living spaces, expanding office space, updating flooring and finishes, all accomplished without moving any exterior walls on the station. City staff recommend approval of this modification so the project can be completed as designed and required. And I thank you and I'm asking for your support in approving this contract modification.

Thank you, Chief McDonald. Council, do you have any questions?

Mayor Walters.

Ms. Hunt.

I'm not sure if this is actually a question for Chief McDonald or for you or for somebody in public works. I did notice that all the individual work orders were signed by a member of our engineering staff. I'm wondering who manages projects like this at PD and FIRE?

That has been, so that's a question for me, and that's been in flux. This project was started by the fire department. Future projects, and you'll see this in the CFP, will be future projects that involve facilities that aren't a utility facility will be managed by public works engineering or facilities. But we're making that change about how that organizational structure takes place. So Chief McDonald has been involved in this one that Chief Harris started. But also engineering was involved as well, so there were multiple cooks in the kitchen. Does that answer your question?

Yes, thank you. I appreciate Chief McDonald stepping in, but I know that our police and firefighters have lots of other things they're really good at and that we need them to be doing, and we also have engineering staff and public works staff who are really good at administering construction contracts.

Well, and that's my objective as well. Council, any other questions? All right, thank you. Sorry, I thought you were moving toward the button there, Mr. Young.

Well, I was, but I said, no, the finger. Oh, okay, all right.

Mayor Walters. Mr. Currier. I move that the city council authorize the mayor to sign a modification to contract 25-035-AFD-002 with laser construction LLC in the amount of $29,771.37. Increasing the total contract price to $290,715.81. Second.

Motion and a second to approve the contract modification. Any other discussion? Hearing none, we'll proceed to the vote. All those in favor of approving the contract modification as presented say aye.

Aye.

Those opposed say no. The ayes have it. Contract modification is approved Thank You council our next item is the wastewater treatment plant alternatives analysis and Brian Walker you are up Council merit tonight we have for you an update on the biosolids alternative analysis

Last time we presented to you guys, there was about an entire page full of technological options on the plate. And through a series of meetings, workshops, vendor presentations, site visits, we've got it narrowed down to a fairly short list. So without further ado, we've got Greg Makos with Brown and Caldwell. One other thing, it's kind of important to note. This presentation is about the biosolids alternatives. It doesn't have anything to do with the wastewater treatment plant proper or the NPDES permit or nutrient removal. That is an entirely separate topic. So tonight it's just about replacing old equipment.

Thank you, Mr. Walker. Good evening, Mayor Walters and council members. Good to see you again. Also, thanks for being so engaged and love giving these updates on our process that we're going through with Brian and his team. So it's been now a good probably nine months that we've been working with the city, going through a prescriptive planning process that's designed to be objective. And as consultants, also being agnostic and not putting kind of the thumb on the scale, making sure that you get a solution for your solids process that's long-term and meets your goals. And so today we're just gonna kind of refresher on what we've done so far. overview of the survey results present the five shortlisted alternatives from the universe of options that we started with and then I'm going to highlight for you the next steps of the process and there'll be another opportunity to engage you all as part of this process later in the fall when we did the surveying activity and highlighted the mandatory goals and evaluation criteria We sent out survey materials to you. You participated in that. Thank you for filling those out. Your staff at the treatment plant and the public works department also contributed. And we typically like to take that and generate sort of a mission statement, kind of that summarizes everything, coalesces everything, Believe it or not, we didn't use AI to generate this, but in short, I'd like to read it. I think that the goal for this overall planning project is to develop a resilient, cost-effective solids treatment program that reliably meets the City of Anacortes' current needs, while remaining flexible to evolving regulations, long-term environmental goals, and future growth. Kind of an all-encompassing objective. We were at in the process here the orange steps are ones that we have completed and we're moving into kind of a more holistic more detailed analysis. We started by evaluating your incinerator. Our staff our specialty staff came out and looked at your incinerator, its sub-components during a planned outage. We made recommendations on improvements both near-term and short-term, both near-term and long-term, excuse me. We then also did an initial solids planning effort to see how we could bypass the incinerator in the future if there was a need to do so. We then determined mandatory must-have goals that the city wants and the city staff feels they need. and then also agreed on those criteria, and I'll show those again here. We then also did a biosolids market assessment. Some biosolids products do have a market and end use, both local and regional. We then screened the universe of options down and identified 14 alternatives that then, through a workshop setting with your staff, we narrowed down to five. This is another illustration of that process. It's just trying to show you that we're funneling things down. And the next step here is our modeling tool, which we will be able to develop end to end alternatives. You'll understand what the widget is. and all the inputs and outputs from it, including costs. Your mandatory goals, you've seen these before, but maybe a refresher for the public. The technology needs to fit on the physical space of the treatment plant. We don't want to be buying the version 1.0, the first of its kind prototype, so it needs to have a commercial installation operating in the United States of similar size. It needs to be adaptable to comply with Current regulations and as best as we can know potential changes to future regulations Fortunately in the biosolid space those don't happen every year and they take quite a while to come to be The most recent having been PFAS regulation the technology should not require proprietary materials Leaving you stranded if a manufacturer goes out of business and can no longer support you And the technology needs to produce a product that has potentially multiple outlets, so you don't get stuck relying on one disposal option for your biosolids. And then last but not least, you wanted a technology that does not need to be staffed 24-7. It can operate 24-7, but doesn't need to be staffed 24-7. Evaluation criteria, you've seen this before. Again, you have environmental, social, financial, technical, and regulatory. Where these are going to come more in play is going to be during our multi-criteria decision analysis workshop, which you will participate in. And that will be a workshop in which we'll be able to basically turn these knobs, and they're waiting to see how those impact the selection. And we can do that in a live setting. this is an overview of this the survey that we sent out to you thank you for 100 response rate from you and your staff generally everyone is aligned on the mandatory goals i just shared as well as those evaluation criteria on the right it's really mostly to show kind of a general If you didn't have this alignment on your mandatory goals and some of these topics, you would see a lot more scatter on this graph. Just quite relevant, I think I'd like to point out operational reliability is of huge concern to your staff as well as the flexibility of the system. In this particular survey, initial capital costs might not have weighed as being important as the other factors, similar with the ability to recover a product and produce a product from biosolids. I'll say that this is an ongoing process, so these obviously could shift, likely will shift as part of that next workshop that I alluded to. This slide shows the starting point. This is the universe of options that are currently known out there from embryonic technologies that are in development and innovative technologies in green that have some initial installations but are still getting adopted. And then you have the workhorses of the industry that are in, I guess we'd call it a cyan color. We took this universe of options, screened them down to the remaining applicable ones that meet your mandatory goals, your pass-fail criteria. Some of these because of their similarity in your specific situation were clumped together. We then held in June a workshop with your treatment plant staff, including public works staff as well, and we were able to discuss 14 end-to-end options that met your mandatory goals, and through a vetting process, we were able to, and some of these, I'll go through them, why. Some of them were screened out because either overly complex due to elevated cost, low applicability to your site, and some frankly really couldn't fit. So there was kind of a re-verification of your initial step where we had done initial screening. We went back and saw that in fact when we sized the equipment, it actually could not fit on site. So now we'll have five alternatives to carry forward in a more detailed analysis. This slide summarizes for you the 14 options that we looked at, and we generated layouts for these based on sizing criteria from your sewer comp plant update, and then obviously extrapolated through 2045, so over 20 years. So the systems that you'll see in the layouts here in a bit are based on future sizing that should accommodate all your growth, anticipated growth. The check marks that you see on the right are the five alternatives. The first two, rehab of your existing incinerator, replacing the incinerator, and then down below, ATAD, which I'll get into in a bit. then bio drying and bio drying with pyrolysis the others were eliminated because of as I said before either too big don't fit on site operational complexity and also cost again these were compared in these were there was no absolute cost analysis done these were all done in sort of a comparative manner more or less expensive more or less complicated more or less operational complexity one one thing of note an incinerator is not a simple piece of equipment it's a complex piece of equipment but because of your staff's familiarity with an incineration system it for example was scored at a low operational complexity because of their familiarity your staff knows how to run an incinerator pretty well

If I can interrupt you for just a moment, I don't know that we need all the acronyms explained, but you might translate FBI to incinerator.

I'm sorry. Fluidized bed incinerator, which is the type of incinerator.

I don't know. We need them all, but just you might have to point out that number one is incinerator and number two is new incinerator.

Correct. And ETAD is a mouthful. It is autothermal thermophilic aerobic digestion.

Some of the explanations are not helping.

We'll call it eight to add. So the alternative one, which I think we expected this to pass as a baseline condition, is to rehabilitate your existing incinerator. um we would imagine that this has obviously the least footprint impact on site rehabilitating your incinerator does mean some expansion of your incinerator building because we'll have to add more sophisticated and additional air pollution control equipment to meet new quad l requirements which are more stringent air emission requirements However, it's a familiar operation. It's a system that you have operated for 30 years. You produce hardly any residuals, just ash in similar quantities as you would today. However, the cons are you obviously are always encumbered by the pretty onerous air permitting requirements and are subject to changes in those air permitting requirements. And one might say, oh, it's been forever since that's happened. Well, the Quad L requirement that you're going to be under was issued as a ruling in 2010. So you obviously are always open to that risk going forward, operating an incinerator. The other con with this alternative is while you're upgrading this incinerator, you're obviously going to have to be disposing of your biosolids in some shape or form, likely through landfilling. So that will mean truck traffic for an extended period of time as that upgrade occurs.

Mayor Walters?

Ms. Moulton?

Just a quick question. Thank you. What do the four L's stand for?

The four L's are not, actually it's not an acronym, it's a CFR subsection of the Code of Federal Regulations. So there's, you operate under triple L currently.

Okay, thank you.

And there's really no rhyme or reason to that, is there?

What do you mean?

Four L's comes after three L's, does that make sense to anybody?

I think they ran out of subsection designations, I assume. Alternative two is a brand new incinerator. Obviously, when you're rehabbing an incinerator, just like when you're upgrading a part of your car, you can't guarantee the service life of the entire car, or you have more risk. You're exposed to more risk because you might upgrade the transmission, but your alternator may fail, as a case of my little metaphor. A brand new incinerator will give you obviously a predicted lifetime for that asset. It has similar pros and cons as your alternative number one. Familiar operation, likely a lesser operational load to your staff because of enhancements in incinerator technology. Similar impacts to the site and you still remain with the cons of being exposed to air permitting requirements. Again, this would be, as I said up here, a quad L incinerator, so more extensive air pollution control equipment. More extensive pollution control equipment requires more extensive maintenance and required annual testing. But we do recommend that you evaluate this option. Alternative 6, I realize that might feel out of order, but we try to keep the original naming of the 14 alternatives, is the only digestion alternative. This is quite a departure from your current process. This is not using any high thermal temperatures. Basically, you're adding air and mixing wastewater, and that is allowing aerobic... oxygen loving bacteria to break down your solids and generally cut it down in half this process can we are currently verifying its borderline but it can fit on your site has a low operational load and on your staff however you will end up producing a biosolid product that has to go somewhere a class a product which is a product that you can give directly to the public similar to what like leconor is doing albert leconner achieves that through a composting program but you can produce a product however when you have a product you got to manage a product you have a product now but it's an ash and it gets landfilled and it's much less cumbersome than the additional volume that you're going to get in this case It's a package system, but they have several installations. Actually, your staff, the manufacturer was on site today and led a presentation with your staff, and I facilitated a tour in Wenatchee. Wenatchee has a system like this. So they're commonplace. They do have a bit of concerns with odor, but they do have an odor control system that's built specifically for their types of odors. This process also does remove nitrogen or nutrients from the side stream, but it will produce a side stream, whereas the other alternatives don't produce a nitrogen-rich side stream. That is not a small factor. I'm curious to see how this will end up panning out compared to the others. But it's your one only digestion option.

Mayor Walters?

Ms. Hunt?

So in contrast to keeping the incinerator or making a new incinerator, this one says you don't have to demo the current one, but we would eventually remove that when the new technologies... could or you could repurpose the building for other uses on site correct okay when we come back to do the actual workshop on these five alternatives will one of the variables that you're able to tell us be how long it would we anticipate construction would take so we know

We will be, maybe not at the next workshop, but at one point we are going to be talking about construction sequencing and phasing in these alternatives. It will be the second step. Okay. The next, not this next step, but the one after.

Because in the first two alternatives, if we are going to have to be trucking solids away for some amount of time, if that's one year or three years, it makes a difference perhaps in how we would evaluate that.

Absolutely, absolutely. alternative eight is an interesting alternative your staff have had the ability to tour a couple of facilities for this using this technology it's basically using a low temperature low energy drying process that's essentially a tumbling composting system although i don't want you to think composting i'm just trying to help you visualize It is actually drawing and producing a Class A product. Again, a product that you can put anywhere. You can give it to the public, you can landfill it if you don't have a place to put it, or you can market it. It has quite a footprint requirement. To get to your 2045, you need six of these package systems that are about the size of a 40-foot container. However, that does give you some room for expandability. You don't have to install all of these at the same time. At a minimum, you would need to install four and then expand them just to have redundancy. They're established. They have several installations. We toured the ones in Scapoose and one down in California, and they have another two coming online in the city of Yelm. And we recommend evaluating this because of their low operational complexity. They would be housed in a building that is a slab-on-grade type of warehouse construction type building, single story. It allows you then also to build that, keep the incinerator operating until switchover is ready.

Mayor Walters. Mr. McDougall. Quick question on this one. Can you give a rough estimate of like what size population growth would trigger the need for growing the six to seven or eight? Like we're at about 18,000 population now and that's six?

I can't answer that question, although the six meets, so these are also very conservative options. These are including, I should have maybe mentioned, touched on this. This is out to 2045, assuming your growth, plus a 50% peaking factor. So these are quite conservative assessments. We can definitely tail these back, but at this point in time, given a lot of the unknowns, we're trying to be conservative in grabbing as much as we can.

That's great. That's perfect.

Thank you.

Mayor Walters?

Mr. Young.

Just a quick, as I listen to your presentation and sort of following along, you do a great job of modeling some of the choices that we have. I look up at where it has relative cost. I see $1 sign and $2 signs, which is part of what we i'm sure we will get to and look at what can we or cannot afford as a city what is being required of us and does it meet our needs now and into the future those are big things one of the things that i i guess i'm also curious about You want to look at all the pros when we talk about what it does all the other wonderful things it still comes down to some of the cons and in some of those cons I'm noticing it says potential odors and you know that and Maybe what we really have to weigh out. I'm not I don't think odors are will go over well. I remember coming across the bridge and when I was first moving here in 2009 and the refineries had this odor that you got when you came past it and it was for all the reasons that one or the other needed to mitigate and one or the other refinery indicated was the other one and why but you know those were not pleasant things but it seems like in many of these examples and choices that we're making we're going to need to make a choice and so with that will come the question of how do we mitigate that are there additional pieces scrubbers whatever in order to do it and at what cost and I think when we began to weigh out what we want to do and how we want to get there, I think that that is also just as much a crucial part about the cost because when we make that decision, we'll have to live with it and hope the public will understand why, whether it's costing more and we're not choosing not to have the odors or it's costing more with a little bit of the odors but a lot less. Those are the things that when the final presentation come, I would love to see how do we mitigate any odors too for those that have that odor. And then adding that cost will help us sort of holistically look at the options that are there for us. Because I think, I honestly believe, I don't think Anacortes I think Anacortes probably would lose sleep over the odors. Absolutely. And the phone calls would be enormous and the mayor's already working hard, so yeah. Anyway, but you get my point. So when those things do come up, I am looking for the solution to that to also be part of what we look at in a holistic view.

Absolutely. I agree. I mean, these technologies, all these options include that. The incineration options one and two don't have that concern because of the nature of that technology. There is no need for odor control because you are burning the biosolids at temperatures that don't produce those odors. So these options, if they need odor control, like this one will, those will be part of the cost and assessment. And then the next stage, I think I presented on this in my previous update to you, where you're gonna get a relative benefit score for each option, and that score can jump around depending on how we turn the knobs for the different criteria. So if you wanna look at, hey, what if we really care about odor? If odor's the main thing, then you'll see that in some cases, that relative benefit score will shift.

One last piece on this. I love how in the slides you've got potential odor. I love that. There's no guarantee that it won't be. What I'm also looking for is, quite honestly, in other examples of other cities or other places that have run this same model forward, You know, what were the like, did they have odor? On what scale was the odors? Was it a 1 or was it a 15 on the scale of 1 to 10? And so what I'm saying, the reason I'm saying it the way that I am is that when we say potential odors, I'm, i'm believing that there will be some odor and the question becomes with each of these strategies of solving our problem i'm looking for that honest assessment of whether or not it would be oldest because others have probably faced it and so when we on the dais and the mayor and the public take a hard look at what we want and what we want to pay for or have to, we'll have that baked into the decision. So we went into the decision eyes wide open. That's all I'm looking for. And you're given that, but I just want it to be clear. That's what I'm looking for.

Absolutely. We'll definitely make sure to touch on that topic at the next workshop. The next alternative is a more enhanced version of the bio-drying, and this is where actually you tack on the pyrolysis process, which allows you to produce a material called biochar that is a PFAS-free product similar to charcoal. and it has a volume reduction similar to your current incinerator in the case of this manufacturer they buy it back from you and at a royalty fee that material generally right now is being used in concretes for uh ad mixture replacement aggregate replacement and generally for carbon accounting if you'd like however this outfit does buy those back so at this point you wouldn't have a a product to dispose of. They would take it off your hands. This obviously has a large footprint impact, but it's also kind of a modification of the previous alternative, and the decision to go this route doesn't necessarily have to be made at this point. It's somewhat expandable. So you would tack on the pyrolysis process to your biodryers. You could install biodryers now, produce a Class A product, and then evaluate down the line whether you want to add on pyrolysis and we felt that this still achieved your your goals it has operational complexity because now you're buying a dryer and a pyrolysis process however it's going to be interesting when we do the end-to-end alternatives on this when it comes to comparing it to incineration sorry ms moulton

I just have a quick question about the biochar. That's used in compost for fruits and vegetables, too. Is this of that quality? Or it seems like if it's going to be used as aggregate, it might not be something you want to put in your vegetable garden.

It can be used. It has more grit in it. It has about the typical, we haven't tested your biosolids, we can, but your biosolids generally are probably like 40% carbon. They have some aggregate sand is still in there. If you were to make biochar out of just vegetable waste, you would probably produce near 100% carbon. It can be used as soil additive. It's just that the industry for biochar has changed direction and sees more benefit value in locking up, sequestering your carbon in concrete, which will essentially stay there forever. A big concern in the carbon markets is kind of some shady trading with carbon where you what happens if you invest in planted Forest and that Forest gets cut down or burnt by a fire what happens to your carbon credits a lot of utilities King County is one of them have explored sequest you know permanent sequestration of carbon and they believe at least the general market believes that biochar is best suited as being stored permanently in construction products. Now, they're not building high rises with this. They're typically doing sidewalks. They have multiple projects across the country, and they are working on developing actual ASTM standards, standards for guidelines, for specs that the public can use. We actually just had a webinar with them on it talking about the latest updates on that. Did I answer your question?

You did. It's all very interesting. Thank you.

Mr. Currier.

Yeah, just one thought, too, like, to kind of tag onto what Anthony was saying about odors. Like, if we're getting down to comparison, too, I think it would be really helpful to understand proximity of... of the facility in other locations, because we are a really small island, and this is really close to our downtown tourism corridor. So I think it would be really important to look at proximity of the plant to where kind of our core downtown is.

Absolutely. I mean, generally at a treatment plant, when you're smelling an odor, it's something has gone wrong or there has been an upset, generally speaking. That's the case. There's going to be undoubtedly whatever option you choose, there's going to be a period of possibly a downtime. And in the case of the incineration, you don't smell a lot of odors because... The process is a high-temperature thermal process. It burns off the odors. In a bio-drying situation, if you had, say, for an outage of a bio-dryer, you'd likely have a material that's partially dried that generates odors, but it would be enclosed in a building with an appropriately designed and sized odor control system. And these would be specifically designed for these types of odors. I don't want to bore you, but there are different sources and types of odors at a treatment plant, depending on what side of the process you're on. Biosolids on this side of the process can be treated with a specific type of odor system, which likely would be some sort of chemical scrubber paired with a carbon filter.

Mayor Walters. Mr. Fantini. Thanks. Welcome back. Good to see you. And also I just wanted to say thanks to the staff and yourself for getting this into the packet on Friday. So we have a lot of time over the weekend to pour over these slides. So I do have a lot of questions, but my questions really aren't for tonight. I just, I know one of the next steps is we're going to have a workshop around this. So I kind of, and I will send this over, but I want to kind of give some background on what I would be looking to evaluate. So like for the first alternatives, the one and two of the rehabbing, I'm kind of curious around air permitting, like what hurdles we might face with the Puget Sound Clean Energy Agency when we're rehabbing versus building a new one. Are there any differences in that? And then I'm really interested, because our staff is extremely good at guessing right. They've done it over and over again many times. And I'm curious how confident we are that our staff is that we can obtain a permit that isn't going to be challenged by a lot of environmental groups. So that's one of the questions. Also around kind of like the landfill logistics, the cost and the timeline, I think, Ms. Hunt already mentioned that. And then any long-term regulatory risks. So with PFAS, you know, if we're talking about redoing our current incinerator and, you know, things change in the next 10 years, will either of those options, can they be retrofitted if there were some big changes to PFAS or would they essentially just kind of become, you know, So that was for those two. For the alternative six, odor control, I think we've covered that enough. I'm curious to know the cost of whatever the solutions are that would involve odor control. And then I am a little interested in this whole biosolids idea and repurposing biosolids. I mean, I go over and scoop up all my stuff from La Conner. I mean, you know, we need... Rather than just dismiss that and say, like, we can't make any money on that, I'm kind of curious if there are any places that have put that into play. You know, we have a lot of landscaping companies around here. We have a lot of, so I'd be curious if there is any opportunity for revenue or if we've seen that in other places. Also, there's only, I think, 25 ATAD facilities in the US, so I'd be very curious what other operational pitfalls that any of the other ones have had. For alternative eight, what I'm curious about, we're talking about six large units. Could there be a phased approach? So like if we went that route, could we have a phased approach where we put two in and then as our flow increases, we do more? I'd love to hear more about that. And then for the... The alternative nine, that's the one I was kind of most confused by. So I think that's the one that, for me, I would love just a little more understanding around.

You get all that?

I'm sorry.

I want to answer all your questions.

I just want you to have what you need for your workshop.

Absolutely. So let's start in reverse because it's fresher. So on this last one here, essentially you're feeding a dry product to the pyrolyzer. Pyrolyzer needs a dry product. The pyrolyzer adds temperature without oxygen and it spits out biochar. So basically it thermically changes the carbon in your biosolids. And it also evaporates all the other materials into what they call syngas. That gets recirculated through the system. It's generally, they like to claim energy neutrality. But that's what that is. It's a high-process system. It's really just a conveyor that's under pressure and temperature. And you have a certain residence time, and it produces biochar. You can make biochar at home. Take a campfire, put a burlap, wet burlap over it, and let it smolder. That smoldering is pyrolysis, just that it's done without oxygen in a controlled environment, so you have a more pure product. The question about PFAS, on the incineration, so... Biochar and ash from incinerator is PFAS free because the PFAS compounds are let's just say burnt up, thermally oxidized because of the elevated temperature. If you produce a dried biosolid, obviously you're not reaching the temperatures where those PFAS compounds get broken down. So yes, PFAS would be in your biosolids. Again, you have pretty normal comparable PFAS levels in your biosolids. You continue to sample as required by State Bill 5033. That's the only regulation that you have right now. I do expect there to be a numeric limit at some point in the future I would generally think that based on your values you are going to be below that limit and I do not foresee in the near future an outright ban of biosolids land application in fact just last month I sent some guidance to Brian if you'd like to share with the council EPA issued an updated assessment on the PFAS risk assessment that they did, acknowledging that it was a flawed assessment, and they do provide you some guidance on how to talk about that with your constituents. Odors, yes, as we mentioned earlier, these options, if they do require odor control, odor control will be included and designed appropriately for it. What other, I've lost track of the other.

Genuinely, I just was giving you some stuff to bring for the the workshop of what we're what I'd be looking at and really the big one I think that encompasses all of that is just some kind of like It if there's like a 30-year life cycle on these types of things or like if there's kind of an expected trajectory that we can look at and

The costs that you're going to see are going to be lifecycle costs in net present dollars for 20 years based on agreed upon interest rates that we want to use, depreciation values, and so forth. We're going to be able to tell you how much water comes in and out, how much power you consume. We're not going to estimate emissions. That's a different effort that we're not scoped for. I'm happy to do so. But you'll have a box. You'll know what the box costs. You know what it takes to operate the box. And you'll know all the inputs and outputs.

I really appreciate you taking the time to answer all these questions. I know it's a lot. This is like a once in a probably my lifetime change, hopefully. Absolutely. It's a big investment. It's a big investment. Absolutely. And I think it takes a lot of vetting.

Mayor Walters? Actually, go ahead. Did you have another point? This is my last slide. Yeah, go ahead. I'll ask after. Okay.

I guess I'm just gonna recap. So right now we're refining those layouts and we're creating those end-to-end alternatives using our modeling tool, suite tool. And we're gonna come up with these five alternatives. In September we'll have a workshop to review and refine those and narrow them down to three. This schedule may shift a little bit, but these are general time frames. October, then we'll develop, this is where the question was asked earlier about phasing. So it's not the next step, but it's the one after. We'll develop a phasing and implementation plan for the three alternatives. Then in November is really kind of where you come in and we look at that workshop and we perform that MCDA live. We'll bring in our decision analysis expert, Topher Jones, and we'll help talk about decisions in a different way that maybe my engineering brain can't. and we'll facilitate a discussion where we can live edit those, as I said, or turn the knobs and see, what if I only care about O and M impact? What if I care about only cost? What if I care about capital versus operating? And we'll glean, we'll see where we end up on that, and then ultimately we want to end up with a recommended alternative in a technical memo early first quarter next year. So that's my presentation. If there's other questions. Mr. McDougall? Thank you.

Yeah, thank you for the presentation. And if you wouldn't mind going back to, I think it's slide 12, which has kind of like the sort of 12 or 13 options. Yes. This one? Yeah, exactly. So the first four that are kind of like recommended to go forward, they all, I'm going to apply like the simplest possible metric here, you know, low dollar, low footprint, low operational complexity tends to be good. The fifth one is a little bit of an outlier in that it's not necessarily following that same pattern. So I was just curious, essentially, what helped number five, or I guess number nine, make the cut?

that's a great question i think it meets your volume reduction objectives it fits on site and i think that recent tours by staff seeing the equipment might have you know brought some an increased level of comfort with keeping this option in they have two installations going on currently in the in california so it's becoming a more established installation base but i do agree with you it's probably the one of these is probably the more the stretch

Okay, great. Yeah, and I'm, you know, not opposed to any particular one. I was, yeah, just curious as to.

I think it stays in there also because it has that promise of future sequencing. So, like, alternatives eight and nine can be seen together. I'd have to see, we'd have to see how they come out with cost compared to the other alternatives.

Okay, great. Thank you.

Council, any other questions or discussion at this point? All right, well, this is more or less just a presentation. We've got a lot of further steps left in the process. Thank you for all of this. I know which one I'm pulling for, but no, I have no idea.

Well, thanks for your attention and also participating in the process.

All right, thank you very much. All right, we'll go on now to item 6E, which is our quarter two finance update. And Ms. Rhonda Peck will present this item.

He was a little taller than I am. All right. So thank you, Mayor, Council, guests who are here tonight. Here to share our Q2 finance update, talk a little bit about how we're doing as a city, our outlook for the rest of the year, and then also a brief glimpse into what we're looking at for 2027 as well. So with that, when we started doing a little bit of a deep dive into what does the rest of the year look like, we noticed a few outliers in the budget right now that may or may not happen. So we went ahead and pulled those out to come up with a rough estimate of where we think we'll land with some projected expenses for the year. We go from a budget of $61.5 million down to an anticipated spend of $49.5 million. and that is that the bond issue for the event center, it may or may not happen, but right now we're not having a lot of confidence that that'll happen by 1231. South Commercial, we believe that one will not happen this year, so we've pulled that out, and then the Korea Salt Pile likely won't as well. The estimated revenues for the end of the year are coming in at $49.6 million, so those numbers are very close. We do not anticipate any sort of a gap going into the rest of this year, What we've got coming in for revenues will cover what we have anticipated for expenses This slide probably looks very familiar to folks and again The the emphasis here is really to show that our property utility and sales and use taxes are 78% of our anticipated tax revenues for the city There is an importance reliance on these revenue streams for the city as it thinks about its future. Sales tax trends. So our revenues are tracking slightly above prior year levels, and they are meeting budget. However, if we really think about the rising costs of just operating the city and continuing to build out our city, we'd like to see the annual growth rate at roughly 10%. Again, this is just a mark. It's a goal. And again, just helps solidify why we're in the situation we're in today. When we look at how sales tax is performing to budget, we are outperforming our current year budget by 2.9%. However, we're not anticipating any change in our budget right now. we are looking at the outlook for 2026 remaining as planned. Our private utility tax for the first half of the year, just talking numbers, is $1.57 million, slightly above last year's pace. This does show that there's continued stability in our utility tax collections. uh... as planned and as anticipated so no surprises there and we'd like seeing uh... the trends going how they are public utility tax revenues uh... it's a slower or uh... a lower revenue it's one point four million uh... this one is up significantly uh... following last year's rate adjustments This does show that what we did last year was needed, and it's been very effective at giving us the revenue that we needed from this revenue stream. Real estate and excise tax. So we start talking a little bit about the housing market and how it's pacing or performing here in the city. First half, we're at $665,000. This is about a 10.8% increase compared to prior year. However, what we're seeing is the average rate collected per transaction or per sale of a home has decreased, resulting in a downward trend of overall revenues. A little bit more on the next slide around that. So again, this is an interesting phenomenon we're seeing right now where our home sales through June are the highest level they've been in the past four years. So we're at 186 transactions. However, the rate per sale has declined. So this is basically indicating that despite the robust activity, the overall revenue growth is really lower and tempered by those transactional values. Sorry, go ahead.

Mr. Young. Just a quick question. When you were saying the rate, you meaning the price of the houses is less, the price has been going down, correct?

That is correct.

All right.

Thank you. And maybe it's not necessarily the price of the homes that are selling. It's the value of the homes that are selling. So we're selling more homes. median value homes. I was trying to not use the word cheaper, but median value homes as opposed to the ones that are, you know, a million dollars plus.

Mayor Walters. Mr. Pantini.

I would also say there have been a few very nice cottage housing developments that have gone on the market that are multi-unit that I think probably were under the million dollar range, considered a little bit lower. So I would think the diversity of housing is probably having a pretty good effect on this as well.

Great points, yeah.

Hopefully. Those would have to be second transactions, though. They would.

Yeah. But we do get, yeah, yes. Just as a quick reminder, so yeah, so real estate is existing, the sale of existing homes. This is not where we collect the revenue for the sale of a new home.

We have asked in this presentation for Rhonda to give us the story behind each slide, but in some cases, and Rhonda, feel free to emphasize this, it is a guess, right? Because there's only so much we can divine from the numbers.

That is correct. So a lot of what you're hearing is my perspective. It's not necessarily anything that I've read or gleaned from others, but this is just simply an analysis of the data as it's presented to us today and how we're feeling or anticipating the future based on that set of data. And for the record, Mr. Hoagland is also on the line here, and if I do misspeak it, I'll heal him. He'll step in and clarify as needed. So now let's talk about building revenues. This has been a hot topic for many city council meetings as we think about and contemplate the changes that are happening with our permitting department. So our building permit revenue, as you can see by the top graph, has declined over the years, and that is really slowed by just kind of the general construction trends in the city. Year to date, there's been 19 building permits that have been issued. This is up three from prior year. Permit revenues are going as planned. About 51% is what we've achieved so far. I don't recall, I think it was Ms. Moulton mentioned earlier that our budget was purposefully less than prior year, and we did that because we just weren't anticipating an uptick this year.

Mayor Walters. Mr. McDougall. Really quickly on this slide and actually the previous slide as well, I think prior to 2020 we were in also a very different kind of housing market and I think not for this session obviously but maybe for the next session it would be great to see 2015 through 2019 numbers for both this slide and the previous. This slide I think is significantly affected by the development regulation update that the council passed in 2020. The previous slide, I think, could also be heavily affected by that, but also by the recovery from the Great Recession as well. So just curious about, like, more historical context.

Okay.

Thank you.

Yeah, absolutely. Appreciate that.

Mr. Young.

Thank you. Also, what would be helpful, too, is I think the mayor issued an executive order. And in the executive order, as the restructuring of the department and how things were processing through and what modifications we're going to make, new software, all of that I would guess my B-School side would say would also have been impactful. And so I know you might not be able to guesstimate on that, but I think it would be good when we look at this process that we just add that into the conversation. Naturally, interest rates are a big deal. People worried about their economy is yet another. you know two houses versus so so many factors come into the economic side of it and i totally get that and what i really appreciate how you take a look at this and bring it forward mr hoagland too but since you're presenting you know really appreciate how you bring it and you bring those discussions to the granular level for us to understand what are those things the only thing I think is missing in this discussion that we're all are aware of is you know that under Mayor Walters he's issued some additional instructions for how we process and move forward so i think that that would be good to sort of link to this conversation but what you're presenting us is stellar and i appreciate it thank you mr yeah i think it'll be it'll be um interesting to have a conversation with mr coleman as these new processes get rolled out and and come into play and

see the number of requests that are coming through as we formulate our outlook for building revenues and construction in general for the city as we think about next year.

no in in the last part about that that i just wanted to add in it you know it's not about i'm not pointing a finger at anyone or any one particular thing it's just really an amalgamation of all of the processes that we're dealing with as a country and how we get there but it's also critically important that we as council the mayor the staff are aware of those other revenue opportunities we have to increase whether that means building and building relationships with the builders finding out about those other opportunities to come forward. I know that's not part of this discussion, but I just really wanted to bring that up as part of the record because it's part of the whole discussion we're having as a city and the revenues that we're looking to give it to generate. Thank you.

Great commentary. Thank you, Mr. Young.

And I don't think you're going to see a lot of effect of the executive order in terms of number of permits going out the door. I think the objective there is to reduce the time, energy, and pain involved in getting the same permits that were already being applied for, but maybe something around the margin. In terms of revenue, the planning department will bring to council proposed revised permit fees next month. And then once those are adopted, then we will see some change in revenue. But there are a lot of variables moving here at once, so it's kind of difficult to predict.

Mayor Walters.

Mr. Pantini.

Yeah, kind of to go along with what you just said and with what Mr. Walters said. Sorry, I was trying to remember what I wanted to say. So we keep looking at all of these numbers, and we've seen declining building revenue numbers over the years. And I feel like we keep waiting. to return to numbers that are like pre-pandemic or pre-recession or whatever. And I really like the suggestion to go back farther and look at all of the years more than just this. Because I think what I'm... what i'm wondering and wondering if we're going to start to see is the fact that we have relied for a long time on building revenues to sustain a large part of our city budget and i think right now we're seeing the fact that that's that's what we're in right is and we don't have the building revenues and i think that um The mayor and the planning department have done a phenomenal job of grabbing that bull by the horns and implementing wonderful new permit ideas. I've already heard from people that they're already seeing improvements. My concern, and what I think we need to keep in mind as we're looking at the budget, is that I don't think in Anacortes we can continue to rely on the building revenue the way we have in the past. And I think we have to almost stop looking for it to return to the way that it was in the past. And we need to start looking for, like this council did a phenomenal thing and found fiber and built fiber and now, and I'm curious to hear a little bit about fiber hopefully tonight too, but. finding more opportunities that are different than the way that we've always done it and i think that was also what the mayor put forward in in his you know his call to action so i would encourage us all to as we're looking at these building revenues not just evaluate them but also look like what else can we do to shift some of the burden away from building revenues, whether that be through strategies of grant writing or through investment strategies. I have seen a lot of very successful cities, if you look at what the city of Ferndale has done through an investment strategy, not with millions of dollars, but slowly built over time. I just think we need to start looking throwing some spaghetti at the wall, having some ideas, vetting some new ideas, and I think that's being encouraged. So that's just my thought on this slide. Sorry for going on a little there.

I think that that point is well taken. Those of you that have heard me speak about the growth Ponzi scheme will understand that a lot of cities throughout the United States have relied on never-ending building to pay for the expenses of the existing construction, the roads that need to be repaved already, and the water systems that need to be rebuilt. And that's not a situation that many cities in Western Washington are finding themselves in, because they all have urban growth boundaries, and they're all constrained in some way. Building is getting harder for a variety of reasons. And there's a lot of negatives to being dependent on new building revenue BALANCE THE COSTS OF THE EXISTING CONSTRUCTION AND BUILT ENVIRONMENT.

MAYOR WALTERS.

AND ALSO DEFINITELY SHOWN ON THIS SLIDE IS THAT THE AMOUNT OF PERMIT REVENUE JUST REALLY ISN'T THERE TO HELP US IN ANY OF THE LAST FOUR YEARS, BUT EVEN BEYOND THAT. The number of units that we have produced, even in 2021, which I think was maybe the high point in the last 10 years or more, just was not very significant. It never met our growth target, and it was off by quite a bit. I think I heard Ms. Cleland McGrath weigh in, so let's call on her next, then we'll go to Mr. Young.

Thank you. Yeah, I think that we've had this kind of this discussion, I think, at committee levels, but it would be it would be beneficial to go back and have it at a full council with the public is when we, you know, came out of that recession. And of course, actually kind of did fared better than the rest of the country because there are such a larger percentage of um retirees and older people who have been in their homes for a long time so there wasn't that they had equity in there or they had paid cash that we don't we didn't see across the rest of the country um at that same time when we were rebounding from the recession moving into Prior to 2020, we still had raw land that was being developed. We had quite a few developments, Rock Ridge, San Juan Passage, a number of others. It was easy land to divide and build single family homes on. When we did the development regulations through 2019 and the 2020 update, we had those multifamily projects kind of in the queue to be how those permits then pulled in 2021 and 2022. I went back and I saw some of those projects. We had some really exciting things happening. So I think we have to think about moving forward is that, you know, Yes, we may not have as much construction, but we need to continue to have infill. We need to continue to have cottage homes, town homes, buildings that are three-, four-, and five-story in the appropriate zones because we need to make sure that we don't price ourselves out of... the current market. We need to take the pressure off for market rate homes, whether they are for younger people or professionals, older people across the divide. You know, we talked about the real estate excise tax that is after a home has been built. We make the city receives sales tax on the construction, but then when it's sold again on the market, that's when we see real estate excise tax. Yes, they're lower. We need to figure out how to encourage and streamline permits and make sure that we have great customer service and are responsive as the city, as the government that kind of handles that component of construction and development.

And before I call on Mr. Young, thank you, Ms. McGrath, I might mention that we are starting to get a little afield from the budget discussion, but Mr. Young.

Now, the only additional points I wanted to make and, you know, really sort of highlight allay to not just the public, but all of the people that are concerned about this issue. It's not as if we're missing the point. One of the reasons that I wanted to form the Economic Development Committee when I was Mayor Pro Tem was for this very reason. most cities when you begin to talk about economics we have all of the entities organizations groups doing a brilliant job on various components for our society whether it's the county in edas whether it's scog whether it's each individual city one of the things that an accord is needed meaning as a city even though we have the port doing economic development this the hospital doing its own push toward economic development you know, the businesses doing their own push toward economic development, the Creative District doing its push to create more people, was that Anacortes really needed to look at what it needed at those various times, as in a time like now, and began to come up with ideas so that our legislators, or those people in other groups that we work with, partner with, our stakeholders, can help us achieve those goals. But we also needed to come up with what they were. One of the things that came out of the Economic Development Committee, I mentioned it to the prior mayor, and then mention it to this mayor. And I appreciate Ryan for moving forward in that we began talking about the fact of grant writers. Yes, grant writers cost. Yes, there are things that need to be done. But yes, assuming that the staff, as hard as they are working, can be aware of every single grant opportunity that's out there that we might be able to benefit from is folly. So part of that is what we're hoping to be able to move forward. Last thing and one of the other things that we're doing in the Economic Development Committee, which is again Mr. Courier, Ms. Cleland McGrath, is that we looked at what are some of the things that we have here as a city that we can use child benefit. We got 2 million people going to the San Juan every year. And assuming that 1% of them could afford to live here, 1% of them or one half of 1% have businesses and other things that they may want to consider relocating here. If that's what we want, we can target them. So those are the granular level stuff that we're working on, working with the chamber, working with Magic Skagit to try to figure out how we enhance the whole region, but surely make sure Anacortes is getting exactly what it's needing to do. So I'm personally looking forward to to continuing to work with Ms. Cleland McGrath, the staff, Mr. Correa, as we work on those additional ideas that we're already pushing forward. And I believe that we've got some good stuff on the table. So, thank you.

And we appreciate your brainstorming on that. This presentation tonight will focus on our short-term strategies. And we need to be working on both short- and long-term strategies simultaneously. But this one, this presentation is more short-term, including our short-term solutions. So let's take it away to impact fees.

So impact fees, again, are collected as part of that construction and permitting process. With construction slowing impact fee, revenues are expected to continue declining.

And impact fees, I mean, you don't have much narrative here, but impact fees are supposed to pay for the costs of growth. So if no growth is occurring, it's not the worst thing in the world that no impact fees are coming in the door. But in some cases, we might want a little bit of revenue there, and a little bit is all we're getting.

Yeah, and we'll take a look at the impact fee current levels here in a couple of slides. All right, so lodging tax revenues for the first half of the year are $179,000. This is down from prior year. So hopefully we'll see a bit of a rebound here as we get into the latter months. And we do typically see a jump or an increase in August and September. So looking forward to seeing those numbers come through.

Mayor Walters. Mr. Fantini.

I would caution our optimism there a little bit. I've talked to some of the hoteliers in town, and this is reporting on April, May, June numbers, but as of now, several of the hoteliers are still operating under winter prices, and there's not a lot of sellouts other than this wonderful weekend coming up that is the Arts Festival, where hopefully everybody's going to go out and spend a ton of money. So I just caution that we should keep an eye on that.

Well, and these numbers track two months behind like the other sales tax numbers, too.

That is correct.

Again, we had some theories as to why this might be, but they are only theories, so we need not talk about them.

Well, we can talk about them if you would like. Okay, so your theory has to do with the... We do believe that there could be... some relevance to the fact that our tulips did pop out in spring a little bit early, that we're not quite seeing the folks coming to town when we would have liked to have seen them or historically have trended to come to town. So that could be a part of the slowdown that we're seeing. But with this amazing weather and lots of activities, I am going to remain optimistic.

Which is interesting because the Tulip Festival has been telling us that Tulip Festival folks are coming to Anacortes. Not everybody believed that, but maybe it's true.

Mayor Walters. That is exactly right. Mr. Fantini. Since we're conspiracy theorizing, I was... Well, that's not quite the adjective that we were going to... I know. It was humor. I would say I'm hearing we're not seeing a lot of Canadians. And I think when you look at their vacation calendar and you realize how many three-day weekends that they have a year, and I think we're seeing a lot of them move on, and hopefully they'll come back. But that's what I think a big piece of it is.

Thank you.

No question.

Yeah. We're still working on that ferry coming back, so we'll see how it happens. All right. This is our major fund summary. This is a little bit busy slide. I'm not going to go through every number. It simply just looks at our revenues, our budget, and our expenses in our budget for the year so far by fund. The one thing I will call out is you are seeing a, I'll just call it a elevated or temporary increase in the cash in the general fund that is driven by the recent receipt of a property tax payment That will come down as it historically has the other thing I will call out that you'll notice negative Cash balances for parks cemetery and library that was intentional We are working to fold those funds into the general fund in the coming months when that happens we will make each of those funds whole and And how it happened was we eliminated the property tax allocation to those funds. Historically, we've spread the load or spread the love. And right now we're just holding that all in the general fund, knowing that we're going to get those accompanying expenses that come across as well. I did mention that I was going to show you the impact fee balances. for each of the areas. For roads, you'll notice about halfway down on the field in the blue columns, roads is roughly 75,000. Parks is at about 236,000. And fire is at about 412. And there are some capital costs that are anticipated to come in against those that were planned as part of the CFP last year.

Mayor Walters?

Ms. Hunt?

Ms. Peck? For the audience at home, I know council understands these slides, but if I look at the bottom line and see that halfway through the year we've only got 34% of our revenue in, that's troubling. Can you explain a little bit about how some of these funds are the planned revenue in the budget are transfers in from fund balance?

Sure. I'll talk about a couple of things. On my very first slide, I talked about some anticipated revenues and corresponding expenses that weren't going to happen this year. Part of that was in the general fund. It was around the $8 million, so right away that $8 million for the general fund, for example, will come out of that $43 million, which would then push your year-to-date number at a higher percent. Let's see. Ms. Hunt is correct. that we do do a lot of year-end transfers that do push dollars into some of these funds. Accordingly, let's see.

Growth management fund, for instance.

Yeah, the growth management fund, we'll see some dollars go in at the end of the year. And again, this is probably a little bit of where quarterly budgeting could help us because we'd be able to actually show what we anticipated as the year went by instead of just looking at a general 12-month trend. So growth management will smooth out. Let's see.

When you go back and compare this to what we budgeted for each of these funds, it all makes sense. And we trust Ms. Peck and Mr. Hoagland, but it's not as transparent on a slide, one slide on a screen, as the public might want to see. And so I just want to reassure everyone that we've looked at it. And we thank them for keeping track of all that.

Yeah, I'll ponder and partner with Mr. Hoagland, and maybe we'll come up with a slightly different way of expressing this one going forward.

But it might just be too busy and ugly.

And then some of those real difficulties, like capital projects living in the general fund can be corrected by moving them to their own capital projects fund. So then you would you would see that lack of spend or lack of revenue in that fund, but not in the general fund where all of our operations are occurring.

That's correct. And so part of what, when I was talking about the consolidation of those funds that have the negative balances right now, you're going to see next week an ordinance that comes in front of you to do a budget amendment. That budget amendment is twofold. It's collapsing these three funds, and then it's also creating a new fund. That new fund will be a 300-level capital fund that we're going to do exactly what the mayor just mentioned. We're going to move all of the current general fund capital planning, whether that be revenue or expenses, into its own fund, which will then give us the transparency And the ability to actually manage our general fund operating expenses and revenues, which should really help drive some clarity and bring home kind of the way we're looking at and managing our city revenues and expenses.

Council, any other questions on that side? No? Rolling on then.

All right, so just a really quick glimpse. This is the same view. However, this is simply meant to show how we're doing in our utility funds. The utility funds are pacing as planned. Their expenses are showing slightly favorable. And this is, again, driven by the timing of capital spend. So this is of no surprise or no concern. And we also don't think that we're going to see a lot of favorability at the end of the year. Services revenues are coming in as planned. Those are called out in the bullets below. But typically what you would see is these are a little bit more predictable. Other than the sewer and water, you can sometimes see some fluctuations related to consumption. However, these are all at levels right now that are supportive of our current year outlook.

Mayor Walters. Mr. Fantini. Question. Where's Fiber?

So Fiber is part of our general fund. Fiber is not a standalone utility or a proprietary fund. So Fiber is a part of the general revenues. The last update I had on Fiber was that their outlook for the end of the year is slightly up. So they are looking to achieve their revenues and then beat them a little bit, driven by the number of folks who are signing up for the service. But again, that is part of the general revenue work stream or tracking. And do you keep that in business information? Is that kept separate because having it as part of the general fund makes it? yes all right then another just a quick look at the utilities before we jump into the outlook for 2027 for the general funds our utilities do remain strong our revenues right now are supporting our operating costs and our capital i will say that our current plan is to raise our utility rates only by the CPI levels that we do each year. However, as we work through the upcoming capital facilities process, we may identify some gaps and come back to the council with some proposed increases based on the projects that you all approve as part of that process and want us to move forward on in 2027. So more to come on that. All right, so now looking ahead for 2027 for the general funds. So this is a busy slide and is not meant for you to actually look at all the numbers. The real story here is the green box at the top of each of these pillars. Each pillar represents expenses for the year and then how we funded those expenses. And maybe I'll start at the bottom first. You'll notice the bottom three boxes are those three pillars, or those three categories of tax revenues that we've been stating are so important to the city. Those being property tax, real estate tax, I'm sorry, sales tax, and then utility tax. Now, that said, I'll take your focus to the top of those bars, and that is the bright green box. Historically, we have been utilizing cash reserves to help support our expenses for the city. A lot of that was driven by the build-out of the fiber network. One thing I will say is that the cutbacks that we did in 2025 and 2026 were a result of the limited reserves. We had reserves, we used them, we spent them, they're gone. So when we did our cutbacks, those were a result of just no longer having those cash reserves to count on and use like we had been. Another thing to take into consideration is property tax. And the mayor has talked a lot about this. And then the building of our new site really helps folks better understand. But The increases that you see right here in property tax for 2024 and 2025, that was due to 2024 to the publicly voted safety lid lift that happened. In 2025, you see an increase on this slide because we pulled out the allocations that we were doing to some other funds for streets and parks capital. I have another slide here and a couple of slides that will talk about how we paste and what's going on with property tax. And again, keep in mind that cumulatively, and again, the mayor has mentioned this in many of his conversations, is CPI has grown 25% since 2021. And with our tax revenues, especially the biggest one being property tax being limited to that 1%, that's really, really been a contributing factor.

The other thing about that public safety levy lid lift, it was intended to be cash neutral. We asked for a certain amount of money because that's what we needed to pay for the added service level. And then we did. And so that doesn't add to the available cash.

That is correct. And it's not on any of our slides, and I'm probably not supposed to say it, but starting in 2027, the proceeds from the lid lift are no longer funding those additional resources that we that we hired based on that levy that went out. So we are now having to dip into and fund some of those resources using our general revenues.

So to clarify what you just said there a little bit, the proceeds are covering it, not 100%.

Correct.

Yeah.

That's correct.

Because inflation comes for us all.

Yes. All right, and just as a quick reminder, what are we paying for with our general revenues? This should be of no surprise to folks, our court, our police, our prosecutor, public defense, fire department, all of our internal organizations, finance, HR, IT, and legal. One thing I noticed isn't in that bucket is facilities. That's also a part of it. The planning department, our local cemetery, the library, the museum, parks and recreation, the senior center, and streets. So all of these different activities and benefits that folks who live here endure is paid for out of the general fund. You're probably getting tired of hearing about it. Property tax is our highest revenue stream supporting the general fund. And again, this is a little bit of an insight as to what has happened and why we're currently in the situation we're at. And since 2020, inflation has been 29%, slightly different than my prior slide, but I think I have another year added here. Property tax has only gone up when you take out the impact of the lid lift, 6%. So in this view, the colored ocean is CPI, so that's your inflation shown through CPI indices, against your property tax, so those orange bars, it is significantly higher. So we're just not able to keep up.

Also, you only see half of property tax for 2026, right?

That is correct.

But we're very confident we're getting the other half.

Okay, so now when we think about what are we up against as we head into the 2027 budgeting process, and again, this view is for the non-utilities. We're anticipating or estimating salary increases aligned with our contractual obligations of $1.1 million. Folks might be wondering what are those contractual obligations. I'll save you from having to go look those up online. Teamsters negotiated a 2.5% increase, so IAFF for our firefighters is 4%, and then the non-commissioned police guild is up 3.5%. So those percentages are utilized to come up with that anticipated salary increase next year. The cost of employee benefits, we just got a notice earlier this month that those are anticipated to go up significantly. In prior years, and last year was a big increase, that was about 8%. So again, this is significantly higher than prior years as well. That 12.5% equates to about $940,000. Based on current economics, the cost of fuel is expected to go up by $30,000. We are looking to spend less on our discretionary spend where we can. Discretionary spend does, however, make up a very small portion of our actual budgets. And we are having to adjust our 2027 outlook for overtime insurance utilities and repair and maintenance because the reductions that we made and proposed for 2026 were just too extreme. So we are bringing those back up to how we're pacing For 2026 as we look at budgeting and planning appropriately for 2027 Our key revenue assumptions again right now is that the utility tax revenues will increase only by CPI we're assuming that the property tax revenues will increase by the allowed 1% of course that will come to Council for approval and Sales tax revenues, we are increasing those slightly above our projections for 2026. And then we are working through a few of the things that I think some of the council members mentioned tonight to get grant funding where we can. We're utilizing external agencies, some experts in the transportation area, and then we are continuing with our lobbyist engagement. So we are doing our best to try to drive and achieve some grant revenues.

Mayor Walters? Ms. Fantini.

Just a quick question about the sales tax revenue projections increasing by 2% over 2026. What are we basing that off of? Is that arbitrary, or is that something we've always done? What's that number based on?

So our sales tax numbers are actually coming in a little bit higher than planned for 2026. We're hoping that trajectory continues into 2027, especially with some of the anticipated, I don't know, not chaos, but excitement around- The dollar store? Well, we have the dollar tree that has come to town. But then we also have the excitement around the groundbreaking for the event center and everything that's happening down at the port. We may be too close to it at times, but when folks that are in some of the outskirts of the Anacortes world take a look at what's happening and what we're doing here in town, they're going to want to come and check it out. So based on a few of those, we were a little bit conservative, I think, at 2%, but we do feel like that is an achievable goal for next year. Awesome. Thank you. Of course.

Also, all things being equal, if inflation is 4%, then sales tax will more or less track inflation.

Unless people buy less.

It is a good inflation story to tell that apparently, I haven't been there, but apparently the items at the Dollar Tree are actually $1.25.

Yes, they are. All right. So all that said, based on the assumptions on the prior slide, that anticipated gap, if you want to do the math, is $2.4 million. So as we, again, go into strategizing about what do we want to do in 2027, how we want to plan for it, different creative vices we want to explore, now is the time. We're getting the number in front of you as quick as we can. Keep in mind, this is a rough estimate as of now. There could be different variables that come into play where this number will fluctuate, and it will. So this is a starting point. It's not set in stone. And we look forward to partnering with the mayor, with the council, and with city staff to glean some of those ideas and run some numbers and see what we can come up with so we can maintain our current service levels, maintain our current staffing, and keep things going along as well as they have been.

Yeah, and it's a rough estimate, but it is based in large part on salary and benefit increases, which we know with fairly good certainty, unless our benefit providers decide to send us a revised update.

Correct. Mayor Walters. Mr. Currier. Just a question, too. I know the concern is balanced budget and looking into next year, and I appreciate jumping on this early. Question regarding future planning beyond a year out. Like, it seems like with some of these union contracts set and making some basic assumptions, do other cities do that? Is that something we would consider to kind of, like, look at long-term vision, like, kind of side-by-side with the actual... 2027 budget we're looking at working on is that something that you think would be Are you talking specifically around the labor negotiation contract? No, no, I'm just saying a lot of our a lot of things I think we can predict can project out I'm just kind of curious like seeing some of these trends that keep continuing shrinking Revenues in certain categories. I mean, I'm curious about the next Two, three, four years and looking at trends there and maybe that would influence decisions we have to make this year.

I think we could. Yeah, I think that's great. Great point, Mr. Currier. I think that we could, I would say very confidently, Mr. Hoagland and myself, we could come up with probably a three to five year plan. Three years for sure. Four and five would be a little bit more guesstimates, I guess I'll say. But yeah, I think that if that's something that you would be interested in. I don't see why we couldn't pull that out. We do have the current contracted rates in place for Teamsters, IFF, and the non-commissioned police guild for somewhat in the future. And based on prior negotiations, we could come up with some pretty decent estimates, I think, going out into those other years.

That's helpful, and I think also Council Member McDougal talked about having some historical perspective in some of these categories as well is helpful as we're looking at navigating a really difficult budget season.

Mayor Walters. Mr. Fantini.

I think it's a great idea. We do that at the bank. Probably a lot of private industries look out more than a year. But also, in addition to kind of like seeing problems that come down the pipeline, it also might give us an opportunity to see opportunities that we might be missing, looking at a longer projection at one time. I think that's a really good idea.

Yeah, well, I know Mr. Hoagland and I looked at some of these numbers last year when we were contemplating what 2026 was going to look like. We did go back quite a ways in history, and we were able to identify just kind of key contributing, key one-time events that would occur that did drive either a positive or a negative to our spend. So I think that that's a point well taken and is an activity that we can definitely support.

Yeah, we have mostly three-year labor agreements. So those numbers we know with pretty good certainty. Benefit numbers, less so. But then there's the revenues. And I think that for the last four-plus years, we have been hoping that sales tax revenues would rebound and return to their prior growth rate. And that is what has really hurt us. To finish that thought because they didn't because because sales tax growth has not been at the rate that it has been in the past All right any other any other questions So counsel, this is our last agenda item, but certainly not the last time we're going to talk about this issue We'll be queuing up quite a few additional meetings on this, hopefully even before we get to the point at which I've got to deliver a preliminary budget to council. So we're working to develop that schedule. If you have specific requests that you would like prior to delivering the mayor's preliminary budget to council or for the process that occurs after that, please feel free to reach out and we'll try to craft the schedule and the process around that. But we want to have a lot of conversations because certainly my intent to not cut $2.4 million worth of service from Anacortes for next year because that would look like entire departments potentially. And I think that each of our citizens actually wants to retain the level of service that we have. They want to retain the maintenance that we have. They want to retain the books that you can check out from the library and the activities that we have. We will be looking at options, especially around the edges on the margins where we can cut expenses, but we will not be proposing to cut $2.4 million worth of expenses. So that means we need some significant amount more revenue. So we'll be engaging in those conversations. So I'd invite you to let me know in person or separately what you think you would like to see as part of that process as we get closer toward delivering the preliminary budget and we'll put out some materials on a budget web page that we haven't built yet describing that process and the bookends that are set in state law for some of the timing. Ms. Kalina McGrath.

Thank you, Mr. Walters. I appreciate the presentation, Ms. Peck. This was very helpful and clear. There was one slide I think that is valuable for us to consider moving forward. I think it was slide 18, and it was all of the different services that are provided that are not under the umbrella of utilities. When we're thinking about what direction the city wants to go, or as council wants to go, Either we've gotta figure out how to increase revenue or we're looking at those services specifically and what are those services that we are willing to forego to move forward and have a balanced budget. And it's pretty frightening. I think that if you go service by service on that slide, all of them are valuable. All of us know the people who work those jobs and our lives are enriched by them. So we need to have some really difficult conversations about what that looks like whether it's you know we we had the previous administration the mayor cut positions last year uh it was very clear last year that 2027 was going to have a very similar challenge um when we when we were going to start putting together the budget so um thank you to uh Ms. Peck and the finance department, and then also thank you to the mayor for starting this conversation early and in a very transparent way, because not only is it, it's not just us on the dais, it's, you know, we need to hear from our community members about what are priorities for them. There's always a balance when we talk about property tax, it would be great if it was tied to CPA cost inflation. Unfortunately it's not, but it's also one of the taxes that is stable. And I think that's probably why the state decided to have property tax. Um, If the economy crashes, we still, in theory, collect those tax, that tax amount year over year sales tax, unfortunately has not increased. And we, um, all of us need to have to try to figure out how we increase our revenue. Um, and I mean, one of those things is making sure that we have a good relationship with a port that are really focused on, um, building living wage jobs. It's making sure that we are working with builders. so that we have housing for folks who want those jobs. And then it's also working with how we leverage revenues that we are able to collect, such as, uh, LTAC dollars to leverage them in the best way possible. And one of those ways we were partnering is this event center, which hopefully will not only benefit our local nonprofits with 12 days, but also will, um, spur development through the different paths that the port has and also just bringing more folks to town and realizing that you don't have to get on that ferry you can have a beautiful experience on an island that only has a bridge so I don't want to it's not all doom and gloom I think we have a real opportunity to have some good conversations because it's only July but we've got a lot of work to do.

Mayor Walters?

Thank you, Ms. Cleland-McGrath. Mr. Currier?

Yeah, I really like your reference, Ms. Cleland-McGrath, to that slide, because I think that really hits home, right? I think it would be just an idea, maybe something for consideration would be a revenue generation brainstorming session where we just sat down, you know, and talked about that in a format which we could dialogue, I would just put that out there for consideration.

Thank you, Mr. Currier. Mr. Young.

Again, brainstorming is if you want to make me happy, bring me to a brainstorming session. I like it. I love the imagination, the creativity that comes out of it, the possibilities. All of them can be ranked. All of them can be determined what may be what we're looking for or what we're not. But if we don't have the chops to be creative enough to explore it, we already have an answer of no. And so one of the beautiful things about the team that we have here on the dais, the teams that we have in the community that we do, and the teams that we have representing all of our department, they are stellar. And they're all working incredibly hard in order to make the best use of those dollars that we do have while enjoying the quality of life we've all come to enjoy, many of us, one of the reasons why we're here. And so, you know, although I don't like the economic climate that we're in right now, I do... I am hopeful. I'm always glass half full. But I'm hopeful because of the people that we have here that are committed to you and Accordance, the mayor that we have that are looking analytically at where we are, how we got here, what we can do. And then also someone that transitioned from being here on the dais with us as a council member. to the mayor or ship so I'm again, you know anybody that knows me knows that I'm glass half full I will brainstorm a way out of it if I can I look forward to the people that we have here with us because truly they are bringing their best foot forward and honestly, I'm just humbled to be considered part and glad to be at the table trying to help this ship move forward. So thank you to all of you. Mayor Walters.

Thank you, Mr. Young. I want you to all know that we've also instructed staff to brainstorm ideas. We'll integrate brainstorming, a brainstorming session into the schedule, but most of our brainstorms involved robbing people's bank. Who told? If we've ruled that out, Mr. Pantini.

Yeah, no, thank you. One of the things that I think could be helpful, too, and I would like to make an appeal to our community, I think that Councilmember Kling-McGrath makes a great point about that slide and the things that are on it. I know what is important to me on that slide, but I really want to know what is important to our community on that slide. So I would appeal and say, if you have opinions on the things that you want us to fund, if there are things that we're doing that you like, tell us about it. If there are things that you don't, you'll tell us if you don't like it. But I would encourage you to please, now is the time. We do have some hard decisions to make, and we want to make sure we're making them in the best interest of the community. And I know I can speak for more than myself when I say we want to represent your voices. So please let us know what you're thinking.

Mayor Walters.

Thank you, Mr. Mantini. Ms. Hunt.

When the budget web page comes up and in our discussions, I think it would be helpful to know, looking at expenditures, I'm going to let you geniuses brainstorm that revenue. What things are we statutorily bound? Public defense comes to mind. There are some things that are non-negotiable. And so it would be nice to just have those identified. in addition to what is the big round number that's our labor if everyone stays with us next year. So we know what we have to work with.

Yeah, that is certainly a critical thing. Thank you. Also in terms of brainstorming, the ideas that we've come up with so far have been $100,000 or less ideas, not million-dollar ideas. So this item is available for public comment. Would anyone like to make public comment? Seeing none here in the audience, do we have anybody online? Nobody online. Okay, thank you. Well, there will be opportunities in the future.

Mayor Walters?

Ms. Hunt?

Is it possible to ask the city attorney if she can come up with a slide of that goose that lays the golden egg and send it to Finance Director Hoagland? He has always mentioned that mythical animal.

Sorry, one more time. Did you say the opioid funds?

The goose that lays the golden egg. Mr. Hoagland insists that it exists.

I will work on that.

And you're in charge of animal slides.

Okay, I'm on it.

Well, we will need to maintain some good humor throughout this process. So thank you all very much. There's no one else at this point. I will adjourn the meeting.