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Lacey Council previews $224.6 million 2026 budget, approves property tax and stormwater rate changes
Summary
At a public hearing, Lacey staff presented a $224.6 million 2026 budget with a $92.1 million drop from 2025 driven by lower capital spending. Council unanimously approved a 1% ad valorem tax increase and a 4.5% stormwater rate increase and directed staff to return with final budget ordinance in December.
LACEY, Wash. — City staff on Tuesday presented a proposed $224,600,000 citywide budget for 2026 and outlined a range of cuts and priorities that leave the general fund at about $74.2 million while shifting much of the capital work into future years.
"This is about $224,600,000 being proposed. This is about $92,100,000 less than the amended 2025 budget," Troy Wu, the city's finance presenter, told the council, citing a large reduction in capital projects as the principal reason the overall budget is smaller next year.
The council approved two related measures that night. Council adopted Resolution 11-77 to authorize a 1% increase in the 2026 ad valorem tax levy and then adopted Ordinance 16-85 setting the 2026 general property tax levy at $9,524,254 and the voter‑approved GO bond levy at $364,000. Both votes were unanimous.
Why it matters: The bulk of the city's budget remains in utilities, which staff said account for about 51.7% of the total, and the 2026 proposal reduces one‑time capital spending that inflated the 2025 budget. Staff also emphasized the city's multiyear effort to bring a budget gap under control while maintaining core services.
Key changes and driver numbers: - Capital projects are reduced by about $65 million year over year, driven largely by projects that were one‑time in 2025. - The general fund is proposed at about $74.2 million, roughly $14.7 million lower than the current year. The current expense fund is projected at $61.9 million. - The police station project is nearing completion; staff said $3.2 million remains to finish the facility in early 2026. - Utilities: about $41 million in utility capital projects remain; water capital is proposed around $25 million, wastewater around $10.5 million, and stormwater about $2.5 million for 2026.
Police overtime and equipment: Staff told the council that the police budget increases by about $826,000, mainly to correct underbudgeted overtime and an equipment rental charge tied to vehicle replacement cycles. "About a third of those overtime expenditures are due to holiday pay," the chief's representative said during the presentation, adding that expansion of the force in recent years has also had a transitional effect on workload and overtime needs.
Reserves and one‑time items: Staff said the city will use roughly $4.8 million in reserves to balance the 2026 budget, including funds for repairs and carryovers from 2025 projects. Troy Wu told the council that the city is pursuing a three‑pronged strategy of revenue opportunities, economic investment and fiscal efficiency to close a multi‑year budget gap.
Stormwater rates and next steps: Separately, the council adopted Ordinance 16-86 to raise stormwater utility rates by 4.5% for 2026, a recommendation staff described as an inflationary adjustment tied to construction and permit cost pressures. That ordinance passed unanimously after council members discussed how Lacey's rates compare with similar cities.
What comes next: Staff will return for a final budget hearing and to present the budget ordinance for consideration on Dec. 16. Council members asked for continued detail on personnel impacts, the long‑term plan for capital spending and scenarios for closing remaining budget gaps.
