Spokane Valley holds first public hearing on 2026 draft budget; finance director projects narrow recurring surplus

Chelsea Walls, Spokane Valley finance director, presented the city’s first public hearing on the 2026 draft budget, outlining a proposed $134 million in total expenditures across 31 funds and describing updated revenue and expenditure estimates that narrow a previously projected operating deficit.

Walls told the council the city’s 2026 budget proposal totals $134 million in expenditures across all funds, including about $70.3 million in the general fund and $63.4 million in other funds. She said estimated capital expenditures total about $35.4 million, approximately 69% of which would be financed through state and local grants (about $24.5 million).

For the general fund, Walls projected recurring revenues of about $68.6 million and recurring expenditures of about $68.5 million—producing a small recurring surplus of roughly $122,000 compared with a prior gap of about $1.1 million. The presentation attributed most expenditure growth to public safety, which accounts for about 65% of recurring general fund expenditures and is increasing faster than other departments.

Major revenue assumptions Walls identified include a projected 1% increase in general sales tax for 2026 (estimated general sales tax revenue $33.5 million) and property tax estimated at $14.3 million (not including the 1% state-allowed increase or any bank capacity). Walls said the sales-tax estimate was based on seven months of 2025 collections and year-to-date trends.

Walls said two options discussed by the finance committee are built into the draft: (1) a lodging-tax application previously approved by council for $257,000 in operations and maintenance of the cross-country course, and (2) potential permitting-fee adjustments that could yield up to $403,000 depending on council action. She cautioned both items depend on action by the Lodging Tax Advisory Committee and future council approvals.

The presentation noted the street fund (motor vehicle fuel tax fund) still faces a recurring shortfall of roughly $500,000 and that staff will return with possible solutions. Walls estimated the general fund ending balance at $42.6 million — about 62.3% of general fund expenditures — exceeding the city’s financial objective of maintaining at least 50% of recurring expenditures as an ending balance.

Councilmembers asked clarifying questions about how the public-safety sales tax and law enforcement contract affect the budget, the timing and details of cross-country course operations, and the city’s use of excess fund balance for nonrecurring capital items. City Manager John Holman summarized that the public safety committee is working on how the new sales tax revenue would be spent and that the earlier deficit incorporated both increased revenues and matching increased law enforcement expenditures.

During public comment on the budget, Mike Dolan urged the council to focus on cuts rather than new revenue, proposed delaying some equipment and capital replacements and asked for transparency about city-held investments. Another commenter asked for projections about litigation costs scheduled for July 2026 and how those costs are being planned for in the 2026 budget; Walls did not provide specific litigation numbers and said grant amounts and other items would be presented as they are finalized.

Walls reminded council that nothing is final until adoption on Dec. 9, and that the council would have additional opportunities — eight total, including three public hearings — to amend or comment on the preliminary and final budgets. The council set the preliminary budget hearing date for Oct. 21 by unanimous vote later in the meeting.