Mountlake Terrace seeks $2.4 million annual tax hike

Mountlake Terrace city leaders are moving forward with a plan to generate $2.4 million in new annual revenue by utilizing the city's banked property tax capacity. The Mountlake Terrace City Council will discuss this specific tax increase at its meeting Thursday as part of the 2027-28 budget process. This action is necessary because the city's financial reserves are projected to fall below the minimum threshold required by its financial policy in 2027 if no corrective measures are taken.

The need for additional revenue stems from an average budget gap estimated at $4.2 million per year through 2030. Looking further ahead to 2035, the average projected gap rises to $5.4 million. City Manager Jeff Niten explained in May that this shortfall results from rising prices for city services combined with a limited ability to raise revenues through property taxes. To address these figures, the council established a community fiscal sustainability task force in July 2025 to gather public input on balancing the budget and replenishing reserves.

In May, the council approved a budget package based on the task force's recommendations. This package included preferred cuts and revenue sources, allowing staff to draft the current proposed budget. One key component is the use of banked capacity. State law permits cities to raise property taxes by 1% annually. If a city chooses not to raise taxes, that 1% accumulates as banked capacity. The proposed increase would add $142 per year to property taxes for the average home valued at $591,400, according to city staff.

The city has already implemented other revenue measures. In June, the council approved a $20 increase in car tab fees. In October, the council approved a variety of fee increases, including utility rates, passport fees, development fees, and parks and recreation fees. These changes complement the proposed property tax adjustments in the upcoming budget cycle.

To offset costs, the 2027-28 budget includes cuts of at least 5% for most departments. These reductions primarily affect travel and training budgets. The city also removed a small number of vacant positions. These various savings amount to approximately $1.6 million per year, according to city council presentations.

The previously approved package also includes a $2.3 million property tax levy lid lift for recreation, parks, transportation, and safety. This levy is not part of the immediate 2027-28 budget. It is scheduled to go to voters in 2028, with potential implementation in 2029 if approved. The plan also includes a renewal of that levy in 2035 for $2.6 million.

The council will hold a public hearing on the budget on Nov. 19. It is scheduled to vote on the final budget on Dec. 3. A full budget book is available on the city website.