Puyallup finance director outlines 2026 mid‑biennium budget forecast; recommends modest sales tax adjustment

Barbara Lopez, Puyallup finance director, told the City Council during a July 15 study session that the city’s 2026 mid‑biennium budget update would include revised property tax and sales tax forecasts and options for one‑time funding.

Lopez said the mid‑biennium review is “required by RCW” and is intended to adjust the adopted biennial budget only where new information warrants change. She told councilmembers the city’s estimated 2026 property tax levy will be higher than the amount budgeted last year and that she recommends moving some revenue assumptions from sales tax to property tax in the revised projection.

The recommendation matters because it affects the city’s projected operating revenue and the pool of one‑time funds available for Tier 3 projects, Lopez said. She also reviewed lodging tax availability and a separate fund created by House Bill 1406 for affordable housing.

Lopez gave numerical context: the city’s adopted 2026 property tax budget is “just over $11,000,000,” and staff now estimate the levy at roughly $11.4 million. The adopted 2026 sales tax budget is about $28.4 million; projected collections for 2025 are approximately $27.3 million. Given ongoing economic uncertainty, Lopez said she recommends reducing the 2026 sales tax budget by $325,000 to align with the city’s budget stability policy and more conservative revenue assumptions.

She described the city’s budget stability policy as using the lower of the last two years’ receipts plus an allowance (3% per year) to avoid basing the budget on the most optimistic single year. “The budget sales tax has a special little carve out in the budget stability policy,” Lopez said.

Lopez described the general fund reserve position and Tier 3 availability. The biennium ending Dec. 31, 2024 left reserves in excess of the policy maximum by about $2.6 million; staff count the excess plus accumulated interest and other sources to estimate an unallocated Tier 3 balance of nearly $8.7 million. Lopez said past council discussion had earmarked $5.0 million of that for a jail and substation remodel; subtracting that leaves about $3.7 million in discretionary Tier 3 funds under consideration.

On the HB 1406 affordable housing fund, Lopez said the balance is about $1,075,000 and listed authorized uses from the statute including acquisition, construction, rental assistance, loans or grants to nonprofits or housing authorities, and limited administrative costs.

On lodging tax, Lopez said external organization awards for 2026 totals $913,390 (calculated per council policy as 45% of 2024 collections) and that city‑initiated lodging tax funds include about $1.5 million in unallocated balance.

Lopez said staff will prepare a formal mid‑biennium proposal for council study sessions in October and deliver the packet by Oct. 6 so members have time to review; public hearings and formal adoption of the levy and budget would follow. She also said Heather Gregerson, the city’s budget analyst, will assist with the October study sessions.

Councilmembers asked for clarifications about conservative assumptions, the mechanics of the budget stability policy, the sufficiency of the $5.0 million placeholder for the jail remodel, and how sales‑tax projections are generated. Lopez said sales tax projections are updated monthly and that staff are using conservative month‑to‑month growth assumptions for the remainder of 2025. She described the $5.0 million figure for the jail and substation as an initial, high‑level estimate that will be refined after expected contracting with McKinsey Architecture and further design work.

Staff did not request or take formal action during the study session. The next steps Lopez outlined: staff will return with a formal mid‑biennium budget adjustment document in advance of October study sessions; council will hold study sessions in October, then a public hearing and final adoption of the levy and budget after any adjustments.

Ending: Staff will deliver the full mid‑biennium proposal to council by Oct. 6 and proceed with study sessions and hearings in October.