Tacoma finance staff told the City Council Committee of the Whole on Oct. 14 that the city’s main revenue streams are underperforming and presented a mid‑biennium budget modification package that pairs proposed spending increases with program reductions.

"Our revenues, again, are about on projection when you adjust for the, known million dollars, million and a half we don't have," said Andy Turullo, finance director. He added that the city’s largest revenue sources—business tax, property tax, sales tax and utility tax—are “lagging,” and that sales tax estimates have been reduced three times in 18 months. "We still haven't found the bottom of that number," Turullo said.

The mid‑biennium modification (mid mod) presented staffwide additions totaling about $17.6 million, most concentrated in public safety (police and fire) and in increases to third‑party liability and workers’ compensation funds. Staff also identified grant dollars that require council authorization to spend.

Why it matters: City leaders said the mid mod aims to keep core services funded while responding to revenue volatility. Turullo said a conservative projection has not yet been met, putting pressure on the general fund and reserve policy the council adopted in 2021.

Key items summarized by staff:

- Watershed modeling: Ramiro Chavez, director of environmental services, outlined a proposed $1,000,000 contract to fund hydraulic modeling across priority watersheds. The consultant work would develop flow scenarios tied to higher housing density under Home Tacoma, projected climate impacts, and changing impervious surfaces. Chavez said the deliverables would include current and future flow simulations, rainfall and runoff projections, system capacity and risk maps, and a summary report with recommended solutions to guide long‑term watershed and stormwater planning and future grant applications.

- 1% for art contributions from Environmental Services: Chavez and Rebecca Solverson, division manager for Arts and Cultural Vitality, described the city’s implementation of Tacoma Municipal Code 1.28, which directs Environmental Services to contribute 1% of eligible capital project costs to the municipal art program. The mid mod request includes an estimated $259,000 in contributions: $217,359 from the wastewater fund, $25,448 from the solid waste fund and $16,226 from the stormwater fund. Solverson noted that TPU (Tacoma Public Utilities) projects are exempt per the code and said eligible projects must be visible and accessible to the public.

- Neighborhood and Community Services reductions: Vicki McLaurin, director of neighborhood and community services, described proposed reductions totaling about $640,000. McLaurin said $105,000 of that stems from savings tied to emergency shelter spending last year; $55,000 reflects reduced need for an external contractor on a pilot capacity‑building program; roughly $5,000 results from termination of a substance use contractor after loss of state funding; and about $180,000 is proposed from violence‑reduction contracts, including not continuing a third school‑based contract of about $30,000. McLaurin cautioned that reducing school‑based contracts could limit access to some school programs.

- IT radio replacement: Staff described a replacement plan for the regional radio system used primarily by police and fire. The city’s device‑replacement fund accumulated through monthly charges per device faces a near‑term peak because many radios were purchased in a single bond issue. Staff proposed smoothing purchases over a 3–5 year window and transitioning to a 10‑year replacement cycle while coordinating bulk purchases with regional partners.

- Tax and licensing audits and short‑term rentals: Finance staff said the tax and license division’s audit and compliance unit has generated revenue net of payroll costs. On short‑term rentals, staff reported that in January 2024 the city had 85 licensed short‑term rentals producing about $9,000 annually; a contractor later identified more than 500 potential operators and the city now records 355 licensed short‑term rentals, generating about $57,000 annually. After the one‑time contractor cost (reported as about $27,000), the net benefit to the general fund is roughly $30,000. Staff said they will consider code changes with permitting and legal partners.

- Reserves and policy: Turullo reviewed the city’s reserve structure and targets. The General Fund Reserve has a 16.7% minimum target (two months of expenditures) and requires a supermajority plus one to use; an emergency reserve target of 5% covers downturns or severe weather and also requires a supermajority of council members present; and a contingent reserve target of 5% is for large legal settlements or capital overruns and requires a majority vote to access. Staff reported a historical reserve sum of about $66 million in 2021 and a 2025 budgeted reserve sum of about $88.5 million. Turullo said the reserve policy requires a plan to replenish any funds drawn down.

What the council will do next: Staff said a public hearing and a first reading on the mid‑biennium modification are scheduled next week, with an anticipated second reading on Oct. 28; no final council action on the mid mod occurred at the Oct. 14 study session. At the end of the meeting the council moved to adjourn and the motion passed without recorded roll‑call names.

The presentations combined follow‑up material from a prior mid‑biennium discussion and responses to specific council questions about the 1% for art, watershed modeling, neighborhood services reductions, radio replacements and short‑term rental enforcement. Staff emphasized that the watershed modeling is intended to support future capital planning and grant applications and that some proposed NCS reductions could affect school‑based services.

The committee did not take final votes on budget amendments at the Oct. 14 study session; staff asked council members to submit additional questions offline and said the mid‑biennium modification will return to the council under the public‑hearing and ordinance reading schedule.