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City lobbyist briefs council on 2026 legislative session, flags local impacts from income‑tax and budget changes
Summary
Brianna Murray, the city’s state lobbyist, told the Bainbridge Island City Council that Washington’s 2026 session produced a new income tax on very high earners, changes to sales‑and‑use tax policy, and limited new capital investments — outcomes that could reduce some city revenues and require local implementation work.
Brianna Murray, who serves as Bainbridge Island’s state lobbyist, gave the council a wide‑ranging briefing on the 2026 Washington legislative session and the likely effects for cities.
Murray summarized the shortened 60‑day session and said lawmakers enacted a 9.9% tax on income over $1,000,000 and included associated sales‑and‑use‑tax exemptions. She told the council the income‑tax package is being litigated and its provisions — including sales tax exemptions that would affect local revenue — are not expected to take effect before Jan. 1, 2028, if upheld. “The implementation of the sales and use tax exemptions is tied to implementation of the income tax,” Murray said.
Murray said the Legislature scheduled $200 million in the next budget cycle to offset local revenue losses from the exemptions, but she warned that figure does not fully cover anticipated impacts and that the distribution mechanics and ongoing status remain unclear.
On transportation and ferry issues, Murray said preservation and maintenance got priority in the transportation budget and that the Legislature did not advance new construction projects; the state did allocate about $4 million for ferry preservation and $750,000 for a study of alternatives to hybrid ferries. She also noted the city’s specific request for $3.5 million for the Day Road roundabout was not included in final negotiations despite a senate amendment.
On housing, Murray said the Legislature approved HB 2266 requiring certain shelter and housing types be allowed in residential zones and narrowed local authority to set some operating standards, while also granting cities more flexibility to spend two housing revenue streams (referred to by staff as the "1590" and "1406" funds) on preservation of existing units rather than only new construction.
Murray also called out several items that fell short for cities, including funding for public defense caseload standards and some liability reform requests. She urged council members to plan for substantial implementation work and invited further direction on which priorities the city should elevate in the next biennium.
Council members asked clarifying questions about litigation timelines, which exemptions would apply to local sales tax, and the consequences for city budgets and capital borrowing. Murray recommended engagement with the Association of Washington Cities and said she would prepare a written report and follow‑up materials for council.
