City Manager Jay Birney told the Olympia City Council at a study session Oct. 14 that the city’s initial 2026 operating budget has a $6.3 million shortfall and that he was seeking council direction on revenue options and reductions to produce a balanced budget.

Birney said the staff team is recommending a one‑time use of real estate excise tax (REET) dollars “to cover the first six months of public safety sales tax,” proposing $1.5 million of REET as a bridge because the criminal‑justice approval and subsequent Department of Revenue processing mean public safety sales‑tax receipts may not begin until mid‑2026. “We’re very conservative thinking that we may not start receiving public safety sales tax till mid next year,” Birney said.

Why it matters: the city projects roughly $116 million in general‑fund revenues but classifies about 36% as protected; staff said that leaves about $74 million available for discretionary use. Birney told the council most of the city’s general fund budget is personnel costs (roughly 70 percent), making cuts difficult without affecting people and services.

Revenue and balancing options

Birney and Finance Director Mike Givens presented four B&O scenarios to raise revenue if the council chooses that route. Staff modeled scenarios that vary the rate for commercial classifications and the exemption threshold; staff included the lowest‑revenue scenario in the baseline balancing work.

- Scenario 1 (more equal across categories) was modeled at about $1.5 million in revenue with a $250,000 threshold.
- Scenario 2 (same rates but a $500,000 threshold) was modeled at about $1.2 million and was included in the baseline balancing numbers.
- Scenario 3 (higher rates for most categories, retail held lower) with a $250,000 threshold would generate roughly $2.1 million.
- Scenario 4 (same as scenario 3 with a $500,000 threshold) was modeled at roughly $1.7–$1.8 million.

Council reactions were mixed but several members said they preferred a version that treated retail differently and provided relief to very small taxpayers. Mayor Pro Tem Nguyen and other council members expressed support for the higher‑threshold scenario (500,000) because it would exempt more very small enterprises. Council member Gilman and others said they could support either of the two higher‑revenue options (scenarios 3 or 4); staff said scenario 4 would provide roughly $545,000 more than the baseline and could fund some of the enhancements discussed that evening.

One‑time REET bridge and timing

Birney flagged the timing gap created by the Criminal Justice Training Commission (CJTC) review and subsequent Department of Revenue processing, telling the council the city may not begin collecting a public safety sales tax until mid‑2026. He proposed using $1.5 million of REET — money originally programmed as a local match for a Mottman Road grant project whose DOT grant was delayed — as a one‑time bridge so the city would not need to program permanent General Fund cuts before the sales tax begins. “I’m recommending that you use $1.5 million dollars of REET one time in your budget to take the place of the missing public safety sales tax,” Birney said. Council members voiced conditional support for that approach, typically noting they would still want to adopt the public safety tax before relying on the REET dollars.

Enhancements discussed

Birney reviewed department enhancement requests that he had included in the baseline or wanted direction on. Highlights included:

- Funding for ongoing replacement of fire bunker gear moved into the baseline (staff estimated about $84,000 per year).
- Adding one firefighter to reduce overtime, a change staff estimated would offset roughly $180,000 in overtime costs if hiring and retention go as projected.
- A one‑time proposal to fund an ADA coordinator from the facilities fund (about “a little over $200,000” in year one), with the intent to incorporate the position into indirects in later years.
- Funding to continue expanded downtown guide (Olympia Downtown Alliance) coverage for another year; several council members urged finding funds to maintain the expanded service level.

Reductions and staff impacts

Birney presented a package of proposed reductions and vacancies intended to close the remaining gap in combination with the revenue scenarios. The staff‑recommended reductions totaled roughly $1.2 million and included a mix of vacant position eliminations and program reductions, such as communications staffing, one city‑manager‑office position, a legal position (currently vacant), and a scheduled retirement in planning that would not be refilled. Birney told the council many of the reductions are drawn from vacant posts and that staff will attempt to place affected employees elsewhere in the organization where possible; he said the most likely number of displaced employees, after internal moves, would be “two to three.”

Council direction and next steps

Council members asked staff to return ordinance language on B&O changes and on the proposed public safety tax to permit timely action. Mike Givens (finance director) said the city attorney’s office will prepare the B&O ordinance language and staff will follow with outreach to businesses. Birney said he had prepared reductions that, combined with the baseline revenue package, would close the gap and that the city would continue to refine numbers ahead of public hearings and final budget adoption on Nov. 24.

Speakers (attributed in reporting)

- Jay Birney, City Manager
- Mike Givens, Finance Director
- Mark Russell, Public Works Director
- Sophie Stimpson, Transportation Director
- Shelby Parker, Interim Police Chief
- Council Member Gillen
- Council Member Green
- Council Member Madrone
- Mayor Pro Tem Nguyen
- Council Member Gilman
- Council Member Vanderpool
- Council Member Majon

Clarifying details

- Budget gap: $6,300,000 (Birney, Oct. 14 presentation).
- Proposed one‑time REET for bridge: $1,500,000 (Birney).
- General fund reported total revenues referenced: $116,000,000; approximately 36% protected, leaving ~$74,000,000 considered flexible (Birney).
- Sales tax growth assumption for 2026: 4.6% over 2025 actuals (Birney).
- B&O revenue model ranges by scenario: roughly $1.2M–$2.1M depending on rates and threshold (staff models).
- Proposed reductions presented by staff: approximately $1,200,000 in the package described at the study session (Birney).

Authorities referenced

- Criminal Justice Training Commission (CJTC) review and Department of Revenue processing (referenced by Jay Birney as the reason for potential sales‑tax timing lag).
- Real estate excise tax (REET) (policy/fund source discussed as one‑time funding).
- B&O (business and occupation) tax policy/ordinance (city staff modeling change scenarios).

Provenance

- topicintro: {"block_id":"block_32.8-45.215","local_start":0,"local_end":1000,"evidence_excerpt":"Thank you, mister mayor, council members. Again, for the record, Jay Birney, city manager. As you mentioned, I'm joined by Mike Givens, finance director. Mike going in and out? Yeah.","reason_code":"topicintro"}
- topfinish: {"block_id":"block_10684.12-10698.46","local_start":0,"local_end":1000,"evidence_excerpt":"Okay. So with the decisions that you've made tonight, we still have a $1,200,000 gap. ... We're marching towards final budget balancing on November 24.","reason_code":"topicfinish"}

Salience:{"overall":0.90,"overall_justification":"The city budget determines staffing and core public safety services; the study session produced near‑term funding proposals and an initial council direction on revenue options, affecting many residents and city operations."},

searchable_tags:["budget","public_safety","real_estate_excise_tax","REET","bno","b&o tax","business and occupation tax","reductions","revenues","Olympia"]