Note: The agenda and transcript list the meeting date as July 21, 2026, but the provided date for this summary is July 22, 2026. This discrepancy is noted.
The Edmonds City Council Finance Committee met on July 22, 2026 (as per the provided date) to discuss bond rating changes, the May 2026 financial report, an updated strategic outlook, a potential utility tax extension, and the formation of a Fiscal Sustainability Task Force. The meeting was chaired by Councilmember Will, with attendance from Mayor May Rosen, Council President Dutch, Councilmembers Wilchin, Echt, Olson, Chan, Vivian, and Erica, along with Finance staff Keisha, Melinda Okerland, and Scott Bowers.
Okay, it is all right. It's one o'clock. I'm gonna call the July 21st finance committee meeting to order at one pm. Today we have quite a few items, but before we get to the schedule discussing item, if there's no objection, I like to uh brief discussions for the Luxin SNP bankrating changes to the agenda as agenda item 2.1 and we'll put the rest of the item down in the order. So today we have in attendance uh Mayor May Rosen, Council President Dutch, myself, Councilmember Wilchin, and Kisa from Finance Department. And then we have Councilmember Echt in attendance. Really appreciate Ms. Okerland. I am saying correctly. Yes. Being available to answer some questions about the bank writing changes. Can you kind of walk us through uh the changes and uh be available to answer some questions? Uh yes, and my colleague uh Scott Bowers uh joining as well, and um I think he needs to be added as a participant, Keisha. Um so uh would would you like me to kind of go over ratings in general a little bit and the the process and and what happened, or do you have specific questions? Oh, just briefly just mentioned about the rating changes and maybe on high level the reason for the changes. Okay. So um as you know, bonds are rated when they're about to be sold, and sometimes uh and and in the background after they're sold, they are often uh they do what they call surveillance, and every one or two years they uh reach out if they have any questions and they look through their financials and they decide uh if they if something piques their interest or um kind of raises a flag for them, they might reach out to staff and ask a question. Um in this case, there were multiple things that were flagged in their uh in their review, and so they reached out and did a full uh questionnaire, and um and so that there is kind of an art and a science to it. Uh I'll explain a little bit. Um they they do have a matrix, but they also do take into consideration other major items uh that are if they that kind of intangibles or they overrule the matrix sometimes if they deem that uh it that there's something else material going on. Uh so Edmunds did have a triple A rating, and they were downgraded three notches to A minus, which is a significant change. The reading also has a negative outlook, which means there is a one in three chance that the rating will be downgraded at the next surveillance. Um I'd like to remind you that Edmonds has a double A rating for its water and sewer system debt, which is actually a notch higher. Generally speaking, uh revenue debt is notched lower than the than the general obligation debt. Uh so in this case, that's great news. It shows you have a really strong utility. Uh so the impact that their rating has is um the rating does not immediately impact the city until the city chooses to borrow in the public market again. Um, if it did borrow, then the new rating would mean it would mean a change in pricing. Um, and it would be an increase. It it's hard to say how exactly how much, but I would put it in the neighborhood of 20 to 30 basis points, which is uh one hundredth of a percent, so 0.2 to 0.3%. Um and the rating change does immediately impact the existing bondholders of the city and uh the price that they would get if they chose to sell it. Um so the rating report, it cites the drained fund balance, reduced liquidity, uh deficits, corroded reserves, um, and they talked about how uh you know actions were taken. They they did note that some budget information uh there it was an interfund loan that happened, and um there were there were changes to the budget and amendments that were made, and um and you know we did sound the alarm by um you know saying we have a fiscal emergency. Um they claimed that it was a little bit slow. Um but we do know that there has been a lot of staff turnover at the senior level at the city. And so I know that sometimes when that happens, it makes it harder to stick to internal policies, which they also uh noted, and uh did that did not happen that not all policies were adhered to. Um and um and but a lot of what they uh a lot I think a lot of it drills down to um liquidity and fund balance. Um a lot of the the of the other things if if there are things that you can do to increase uh the their confidence in uh and management and reporting, uh you can send uh unaudited financials as soon as they're ready. You can send budget information as soon as it's ready. Um so that they're not waiting for information. It shows that you're proactive. And I'm I'm sure staff has already been doing this, but um, but these are some of the things that you can do. Um lately for all of our clients, the thing that has been kind of beaten it to death is an in is liquidity. Um they care a lot about it just now. Um it is something that a lot of time has been spent on, and even cities with and counties with a lot of liquidity still are not being able to be triple A rated because the standard is just very high right now. There's a lot of focus on liquidity. Uh I have another client that um is rated uh I think one notch higher than you, um, and they have a 15% fund balance. Um they have other things going against them that you know you have you have different factors um in terms of your demographics and other things, but um that that was one of their strengths, but they still pointed out that they maybe could do a better job. Um so uh with all that being said, um the things that you could that the city can do to um uh they all oh excuse me. So one of the other things that they uh that they noted, which is out of your control is the timing of the state auditor's office coming to audit the city.