Lacey presents preliminary 2024 year‑end financial report; council warned of sales‑tax declines and future costs

City of Lacey finance staff presented a preliminary 2024 year‑end financial report at the council work session on April 8, reporting higher expenditures in the general fund tied to transfers for the police station and rising labor costs while flagging sales‑tax weakness and timing issues in property‑tax collections.

Finance staff said the general fund—s expenditures increased by about $15.8 million in 2024 compared with 2023, driven primarily by transfers for the new police station and higher salary and benefit costs. The presentation described transfers increasing roughly $11.7 million and a total salary and benefit increase of about $4.1 million.

Troy (identified in the meeting as finance staff) told the council that police department costs rose about $1.3 million in 2024, primarily from salary and benefits and overtime; the city budgeted roughly $650,000 for overtime but incurred about $1.0 million. He said some program costs shifted from the general fund into the new public safety fund established by a 0.2% sales tax and that capital timing — delayed projects from 2024 to 2025 — affected year‑over‑year transfers.

On the revenue side, staff reported a year‑over‑year sales‑tax decline of about $468,000 (≈2.8%) and said admissions tax has not fully recovered from pandemic levels. The council discussed an apparent lag in property‑tax collections; staff characterized the shortfall as a timing and collection issue at the county level and noted that property tax is typically nearly fully collectible over multiple years. Finance staff said a dip in building permit and plan‑checking revenue also signals slower construction activity, which will affect future property and sales tax growth.

Staff outlined several utility fund changes: water operating revenues increased about $3.0 million because of a rate restructuring that moved capital contributions into operating and then transfers to capital; water expenditures rose about $4.5 million, largely from capital transfers and a one‑time increase in meter purchases as supply constraints eased. The city is drawing down a $10 million Public Works Board loan and evaluating future debt needs.

Troy said interest‑earning paper losses reduced reported investment valuations by roughly $587,000 at year‑end (an accounting valuation change), though cash interest receipts rose by about $170,000. The city also used roughly $500,000 more of American Rescue Plan Act (ARPA) funds for the police station in 2024 than in 2023, the report said.

Staff emphasized that 2024 salary and benefits totaled about $43 million budgeted for the general fund and that the city has become more fully staffed: payroll spending reached about 97.5% of budget with roughly 20 vacancies remaining. Medical‑insurance employer costs increased in 2025 (cited figures: Kaiser +8.2%, Regents +7.3%, Willamette +6.9%). Troy said the city remains unsettled in bargaining with AFSCME and that negotiations could affect future budgets.

Looking ahead, staff noted several near‑term operating costs: occupancy and utilities for the new police station (occupancy expected in early 2026), maintenance costs for Peacock Park expected this summer and a projected $350,000 annual maintenance increment for a later phase of the RAC project (estimated for 2028). The report also referenced an unresolved statewide Supreme Court decision on indigent defense as a potential budgetary risk.

No formal council vote was recorded; staff will bring additional budget work plans and revenue opportunity items to future meetings and recommended a conservative approach while monitoring the trends.

Ending: Councilmembers asked staff for additional foreclosure and property‑tax aging data and requested that staff return with a draft work plan for the revenue opportunities discussed at the retreat.