Lacey city manager presents $224.6 million 2026 budget; recommends using about $3 million in reserves

City Manager Rick Watt presented the City of Lacey—s proposed 2026 budget to the Lacey City Council on Tuesday, Oct. 21, proposing a $224,608,571 spending plan that he said is "balanced, but ... balanced with, using about 3 just over $3,000,000 in reserves." The presentation kicked off the formal review process that includes public hearings and final council action scheduled for Dec. 16.

The proposed budget focuses on maintaining current service levels while funding capital and strategic commitments. Watt told the council the plan supports about 342.5 full-time equivalent positions and a general fund of $74,344,285, and he highlighted a number of pressures and one-time costs driving the recommendation.

Why it matters: the budget determines funding for police, streets, parks and utilities and would change household utility bills. Watt warned that weakening sales-tax growth and rising operating costs leave the city with limited options and require a mix of revenue enhancements, economic-development investments and expenditure reductions to avoid continuing to draw on reserves.

Key figures and revenue context

- Total proposed budget: about $224.6 million; Watt said the proposal is balanced using just over $3 million from reserves. - General fund: $74,344,285 (decrease from 2025 driven mainly by capital transfers and one-time projects in the prior year). - City population and staffing: the city serves about 60,380 residents and the budget supports roughly 342.5 FTEs (about 276 FTEs funded by the general fund). - Sales tax: the city—s largest but most volatile revenue source; projected 2026 budgeted sales-tax receipts are about $19.29 million. Watt said month-over-month sales-tax receipts have flattened compared with earlier years.

Watt summarized wider economic and policy influences: a flattening of development activity that limits assessed-value growth, inflationary increases in labor and materials, the failure of a recent metropolitan parks district ballot measure and state and federal mandates…