Council reviews 2026 budget outlook as public‑safety costs outpace general‑government savings

Newcastle city staff presented an initial look at 2026 budget assumptions and the city’s sustainability model at the July 15 council meeting, flagging a growing gap between public‑safety costs and the general‑government budget.

Finance Director Lindsay Chambers told the council the employer contribution rate for PERS decreased effective July 1, providing near‑term savings that staff folded into preliminary projections. Chambers said the city also expects net savings from prior internal‑service adjustments and copier contract changes, but those savings have been outpaced by rising police and fire contract costs.

Chambers said total public safety costs — King County Sheriff’s Office contract, Bellevue Fire contract, jail and related services — have risen significantly over recent years. "We know fire and police are increasing more significantly in recent years than they have in the past," she said, and noted KCSO has deferred about $5 million in insurance costs that will be assessed to contract cities in coming years.

Staff presented the facilities fund in detail. The Newcastle Professional Building (City Hall) generates tenant base rent and common‑area maintenance (CAM) revenue; the fund also covers the annex building and a city garage. Chambers described two ledger buckets: the building CAM (shared landlord expenses paid by tenants) and city‑specific facilities expenses (utilities, maintenance and a portion of staff costs). She said the building carries debt service that runs through 2035 and cited an annual debt service figure in the presentation (shown as $346,000 in the budget slides) that Treasury and the council will manage while pursuing higher tenant revenue and tenant negotiations.

City Manager Pingel said moving the public works staff to the annex is intended to free tenant space in the professional building and increase long‑term tenant revenue. Chambers said HighPoint (the building manager) would assist with renewal negotiations and market research when space becomes available.

Staff also explained the city’s allocated American Rescue Plan Act (ARPA) funds. Chambers said roughly $715,000 remains obligated for 2026 for the public‑safety initiative the council adopted previously; staff will not transfer those funds to the general fund until expenses are incurred and reconciled in the relevant years.

The council reviewed the sustainability model that projects operating surpluses or deficits under different revenue options. Staff demonstrated scenarios that included a voter‑approved public‑safety levy (example amounts of 10¢–50¢ per $1,000 of assessed value were modeled) and utility‑tax options (1%–6%). With no new revenue sources, the model showed the council could face fund‑balance pressure later in the decade; adding a modest public‑safety levy materially improved projected reserves.

Council members pressed staff on options. Council member Quick asked about refinancing options to lower annual debt service on the professional building and urged staff to “look under the hood” for savings. Chambers said refinancing is technically possible but depends on current market rates and that there would be transaction costs to weigh. Questions also addressed facility costs such as cameras, elevator maintenance and how electricity and CAM costs are met by tenants.

Chambers and the city manager outlined the next steps: finalize preliminary budget documents, post the preliminary budget, continue revenue and expenditure analysis, and present more detailed budget talks in September and October. Staff also noted a town hall is being scheduled for the week of Sept. 30 to present budget materials and take public questions.

No formal council action on revenue options took place on July 15; the briefing was informational. Council members were given the sustainability model and asked to identify any additional revenue or expenditure scenarios they want the staff to model ahead of preliminary budget publication.