Lacey staff report quieter revenues, rising labor costs; model shows roughly $4.7 million 2026 shortfall under current assumptions

At a June 10 Lacey City Council work session, staff presented the city’s first-quarter 2025 financial report and a five‑year budget model that projects a roughly $4.7 million shortfall for 2026 under current assumptions.

Troy, a city finance staff member, told the council, “You do have in your full packet the detailed first quarter financial report for 2025. I do want to recognize it's about 2 months past due… there were no surprises, so we didn't feel an immediate need to come before council.” He and other staff reviewed revenues, expenditures and the assumptions behind the model the city will use for next year’s budget development.

Why it matters: tax receipts make up about 68% of the city’s general fund operating revenues, and labor costs historically account for roughly two‑thirds of operating expenditures. Small changes in collections or compensation therefore have outsized effects on the city’s budget outlook.

Key figures and trends

- Revenues and cash impacts. Comparing first quarters of 2024 and 2025, general fund revenues were about $587,000 lower year over year. Plan‑check and related service charges were down (Troy cited roughly $151,000 less in service charges and about $239,000 lower plan‑check fees). Investment valuation adjustments reduced reported revenue by just under $400,000 (a non‑cash, year‑end market valuation change). Interest revenues were about $128,000 lower through the first quarter.

- Sales tax. Staff reported first‑five‑month…