A state audit rips Lynnwood's elected officials for spending millions in reserves in 2009 and leaving the city in precarious financial shape.

A state audit released Monday rips the city of Lynnwood’s elected officials for spending millions in reserves in 2009 and leaving the city in precarious financial shape.

The audit follows months of finger-pointing between the City Council and Mayor Don Gough over who bears responsibility for deficits that could result in January layoffs for 102 employees — including 25 police officers — if new taxes or employee concessions aren’t agreed upon.

“I have zero confidence in the ability of this council and this mayor to address this disaster,” said Mark Brinkman, president of the Lynnwood Police Officers Guild.

The report by the office of state Auditor Brian Sonntag found that Lynnwood officials blew through a $6.1 million general-fund balance in 2008 to end with a negative $115,733 balance in 2009. The city also exhausted its $2 million reserve fund and borrowed $3 million from its utility fund to pay for daily operating expenses.

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In spending down its reserves, the city violated its own policy that requires a minimum of $4 million be left each year in the general fund. The audit concludes that Lynnwood’s deficit spending puts it “at risk of not being able to meet all of its financial obligations.”

City officials said the sharp drop in sales-tax revenues has been felt by cities across the state and nation.

The city has adopted new utility taxes on water, electricity, gas and sewers, instituted a hiring freeze and transferred other city funds to make up a projected $5.5 million gap this year.

“The 2010 picture is much better than 2009,” said Interim Finance Director Patrick Dugan.

Not known is whether the city will approve additional taxes to make up a projected $22 million shortfall over the 2011-2012 biennium, or balance the budget through other measures that could include employee furlough days and wage concessions, or deep cuts to staff.

Gough’s final budget proposal will be released Monday.

Brinkman said the Police Department would lose 43 positions, including 25 officers out of 78, under the preliminary budget proposal.

Brinkman said the Guild is currently negotiating with the city over wage concessions, but even if officers gave up a scheduled 4.5 percent pay increase in 2011 and step increases, the savings to the city would be only $276,000.

The Parks Department is facing cuts of 32 employees, including 11 full-time jobs, said Director Lynn Sordel. That will hit the senior center, as well as programs for preschool, youth and adults.

Councilman Jim Smith said that public safety should be a priority and other programs, including parks, should be cut first. He suggested not opening the city’s new $25 million recreation center, scheduled to be completed in April, as an alternative to laying off police.

Lynn Thompson: 206-464-8305 or lthompson@seattletimes.com