Finance Committee - Regular Meeting

Good evening, and welcome to the oh. Good evening, and welcome to the September 15 meeting of the finance committee of the Olympia City Council. We have all of the committee members present and plenty of staff to get the job done. So maybe we could start by considering the agenda.

Move approval.

Second.

Right. It's been moved and seconded. All in favor of approving the agenda as published, say aye. Aye. Alright. We have an agenda, and I am working my way towards having Internet connection here because for some reason, it didn't wanna automatically connect like it usually does. Do we have we have minutes to approve. Right? Yep. Yep. The August 18 minutes have

I'll move approval.

I'll second.

Alright. All in favor of approving the minutes of August 18, say aye. Aye. Wonderful. What a chorus. And we're on to committee business, and the one item that we have before us this evening is update and discussion about the 2026 operating budget. City manager Jay Bernie is gonna lead off the conversation.

Thank you very much. This has been a a a twisting journey to get you to tonight, and I think we're gonna we might take another couple twists tonight based on how the conversation goes. So tonight is the first budget update for the finance committee around the 2026 budget. Specifically, we're here to provide a thorough overview of the revenue options that have been in front of council a few times, and we've kinda listened to the questions that we've that we've heard along the way and have continued to fill in some blanks. And then the chair and I had a conversation last week that he shared with me about finding some maybe some additional time and a process for some additional council conversation around around all of this.

So what we're hoping to do tonight is to get some feedback from the committee in terms of next steps and conversations with the full council around our path on the budget, whether they be revenue or expenditure reductions and kinda what that looks like. So what I thought I'll do is I'll set the stage a bit just kinda where we are with with everything, and then I'm gonna pause, and we can kinda take many number of doors. We have everyone here that can talk through the revenue options. So one option is we can talk through all those just so you can see everything and and and have it. And then I've asked Stacy to give some thought about, what was some additional process, some conversation with counsel be like around how we set some sideboards around either revenues or expenditures, reductions, not reductions, use of reserves, not use of reserves.

There's lots of different ways you can go that might help us get a little closer to where everybody is, on things. So I'll put that out there as well. So I'll start and kinda set the stage a bit. And go ahead, Owen. I think you're driving. So as you all know, you've seen this many time, many times. Our work is rooted in the comprehensive plan, and it's the community's plan. It's our vision and focus for the work that we do at the city of Olympia. It's a big document, and we have broken it down into focus areas to kind of keep us in an easy way to communicate what we're doing. And, in fact, our work with PBB will be able to break it even further to show the community how we spend our money in each of these areas, which is kind of where we're heading.

We work on our budget all year. We work on our priorities early in the year, measuring how we're doing through tools like surveys. And then when we get into the fall, the time that we are now, we start to move into the more formal budget process leading to a formal budget proposal and approval in November and December. So what's really important is about this year in particular is we've been talking about budgets since your January retreat and kind of staying engaged on what the forward looks like and, and knowing where where where we gotta go. This is just a reminder that when we launched our last community survey in 2023, the community told us that the top five priorities that we should be focused on from their view are housing homelessness, public safety, economic development, transportation, and climate.

Consistently have been, over the last couple surveys, kind of our top five priority areas we've heard from our community on through survey work. So before we get into 2026, I I wanna recap where we've been because I think, as I said, it helps set the stage kinda for where we're gonna go. We balanced our budget in 2025 with the use of fund balance or onetime monies, which means that although we did make reductions last year, which I'll talk about in a minute, we knew going into this year we had more work to do to close our budget gap through new revenues or further expenditure reductions because we use, as it turns out, almost around $5,000,000 total to get our way through 2025 with with changes that have come about since you adopted your budget. We are at a use of about $5,000,000 of fund balance, which means that we start this year in the whole 4 or $5,000,000 because we used onetime monies last year. In terms of reductions, and you keep right on going, Owen, we eliminated 17 general fund positions along with some other reductions in frozen positions, which saved us about $3,200,000 for 2025.

So we did a lot of hard work. What's not shown here is we also cut some other positions in the development fee fund to help right size that fund, so it's not as reliant on the general fund. In total, it it was well over 20 about 25 positions in total, I believe, that we reduced last year in total. But the gen and when we look at just the general fund, $3,200,000 in reductions. In terms of our discussion for this evening around 2026, I wanna cover some of our assumptions at around the 2026 budget so you can kinda see what we've already thought about, provide our current balancing position, and then we can pause and discuss how you wanna have the discussion this evening.

There's, again, there's a lot of options at your disposal. We can review revenue options, which include adding information based on the questions we receive at your August study session or also pivot and talk around the conversation Clark and I had about the need for maybe some more follow-up discussion with the full council. So for the general fund budget, budget assumptions. What we have plugged in to the baseline right now is a 2.7% wage adjustment for independence, which matches most of the labor groups as well. It's where CPI was at the June.

That's what we base our labor contracts off of. And usually how we plan for unions, that's how we plan for independents. So what we've got baked in is that. I will also say I'm gonna talk about that in a minute. We've got health care. We still are dialing in our numbers anywhere between 1114%. We'll have final numbers here soon, but we've you know, it's usually somewhere in that range. Health care costs go up every year. As we get final numbers from our providers, we'll dial that in, but that's what we have. Workers' comp, as you know, we've made our change to L and I through the state.

We do expect an increase. We expect an increase every year, so we've accounted for that and any rate changes and increases. The other thing I'll say is on wage adjustments is we're a bit behind as we've continued to negotiate with OPD. So we do have catching up all the OPD contracts as we get that finalized and back pay for all that all into the baseline budget. So we've accounted for all of the labor and all of the labor costs in the baseline budget, for as far out as we can see.

So this is kinda where we are. As of September 15, which is, today, we have a general fund deficit that's about $7,000,000, and there's several options that we can utilize to close that gap. One is to continue to look at expenditure reductions. The other is to look at new revenues, which we've talked about. The other is a use of reserves, which we can talk about in a minute.

And and the other one is is some combination of all the above, right, to look at any and on all of those things. When it comes to expenditure reduction so I don't have a long list here today. We've just we've kind of started that work. But one of the things I want to point out is one of the things I'm planning on providing at some point to the full council is if you didn't pass or enact $5,000,000 in new revenues, what would $5,000,000 in reductions look like? And we're working our way through that right now.

No later than September 30, depending on where we go with this discussion about process, we'll have that for all of you to look at.

Why $5,000,000 if the deficit is 7,000,000

So good question. So although your deficit is $7,000,000 right now, as I've looked at it, if you said yes to revenues that total about $5,000,000 that leaves you about $2,000,000 short. With the assumptions that we're still looking at and some of the numbers we're still finalizing, I think I see a pathway, as I look to the team, to be able to close that remaining $2,000,000 gap without any further reductions. So I think there's a pathway to get if my job was to close a $2,000,000 gap, I think I can get there without significant reductions. There's a few options I'll have to put in front of you to check with you on.

But as we've talked about as a team, I think there's a pathway here that we can that we can we we can get there. So that's that's y five. So with that, I'm gonna pause before we get to revenue options. So we can do kinda one or two things here, and I mentioned it. We can go through those so you have them because they're here and so you can see everything that's there, or we can kinda take a pause. And maybe, Clark, you can kinda talk about our conversations and kinda what you're hearing as you've had and talks, and we can talk about what that might look like.

Sure. I'll just I'll give the very short version is I'm I I was we were planning this meeting coming and imagining we were gonna advocate that our committee recommend the two sources of new revenue, a use of of reserves above the fund balance reserve that we wanna hit and and some reductions and that we would push that proposal forward. Over the last couple of weeks, I've heard two threads of concern from from some of our colleagues. One is about the the two new source potential sources of revenue, and the other is about having more full conversation about what reductions to have revenue and expenditures be at a rough match might look like. So so that's what prompted me to ask if if if we would benefit from more consultation and and discussion with all seven members of council rather than our bringing up a a proposal from you know, having tonight refine the staff presentation that would come to the September 30 meeting, which is where I'd I'd started this.

So and I'm I'm open to whether we talk about that now or if you'd like to go through the the criminal justice sales tax and the b and o changes and and then open up the conversation. What do you think?

I'm fine either way, whichever makes more sense.

I Yeah. I would like to have a discussion at least on the b and o. I felt like there was information in here that I know we've discussed this a lot, but I felt like there was some information this time that we hadn't. Absolutely. Least that piece

roll through the rest of the staff presentation and then have conversation? Is that good?

Is there anything else you can say about the concerns? Oh, is there anything about else that you can say generally about the concerns about revenue?

Oh, just that I've had some people with hesitation about the business and occupation and some people with hesitation about the sales tax. So

Just generally. Okay.

So I I we're we're not aligned, and my preference would be that at least folks feel consulted and ideally that we come to a consensus. That's that's my hope. But let's let's roll through the the two revenue presentations and then talk more broadly.

Okay. I think we're gonna roll into b and o first. Right? So I'm gonna turn it over to Brandy and Thomas. So since you last saw this presentation, we took a lot of notes at your at your study session. We we're we're trying to be sensitive to every question that came up and every different way we could kinda slice and dice the data around b and o to give you some things to look at for your consideration. So they're gonna go through all that, and, and we can kinda we're gonna take questions as we go around all this. Okay? Take it away.

This, slide wasn't in mine, but oh, yes. It was. This is, like, big picture where we are. I think we can move on. Alright. I tried to find the first ordinance for the first b and o tax. It was 1955. And what was interesting to me was that the tax rates were the same back then as they are today. So we haven't changed our b and tax rates in seventy five years. Kind of an interesting fact.

And just setting the stage right now, roughly, our b and o tax revenue is about 8,000,000, maybe a little higher this year. And those b and o tax revenues, as we talked about before, they just flow into the general fund, and they help to fund a lot of different things. So really valuable source of revenue. And then we thought it might be good to, talk a little bit about how b and o taxes work. So the b and o tax is based on business activity, and that activity, it doesn't matter where the business is located.

If the business activity is here in Olympia, then it's subject to our b and o tax laws. And so you can think about a few different examples. If you have a bakery in Seattle and it sends you some donuts, that is a business activity here in Olympia, and it's subject to b and o tax. If you have a fencing company in Tacoma, they refinish your deck, etcetera, etcetera. So, destination based is a good term to hold on to.

Our b and o tax, we all the cities that have a b and o tax, we all operate under a model code. And there are seven seven different classifications of business, and they each have a unique rate. Our rates, we we only have two different variations. We have point zero zero one and point zero zero two. And, another important thing to note is that many businesses, whether they be a retailer or a wholesaler, they file across multiple classifications.

So that makes, I guess, quantifying impacts challenging. But we've always done that when we've presented you with the information here, since we have the detail. You saw a slide similar to this last January. This one pulls in a couple more cities. I tried to just get all the cities around us. And these rates here, it isn't all manufacturing, retailing, service and other, wholesale. Yes?

So one thing I noticed on this slide is that, you know, right now Lacey Olympia, Tumwater are all aligned. Jay, are you at all aware of whether either of our neighboring cities have discussed changes to theirs?

I have not. Not in this moment in time.

The last column there, I just wanted to draw your attention. That's the note the the $0 filer threshold that we've been talking about. Right now, the threshold is 20,000 for us, And, you can see a lot of the other cities are still at 20,000 like we are. A few of them have gone higher. And so just, by way of review, that means if you're a business and your business income within Olympia is less than $20,000, you get to send your filing in and write zero tax due at the bottom.

Is our max 2%?

All the cities have a max of point 2% without voter approval.

So So it's almost gone to the voters then. Yeah. Okay. Interesting. I thought theirs was interesting as they've kind of played with each one of them separately.

Mhmm. Thank you.

I guess another thing to note is that quite a few of the cities have increased their retailing rate. But as you noticed, Lacey and Tumwater have not.

Pardon me. We were just wondering whether the fact that Seattle and Tacoma are charter cities and not under the model code, if that that changes their flexibility for those two cities.

I think it's the same because all of the cities, of their, I guess, type of city charter, we all operate under the same model code.

So they must have both gone to the voters to allow additional. Thank you.

The this slide you've seen before as well. It's just, big picture. Our b and o revenues across the business classifications and the number of taxpayers, and we've isolated the zero dollar filers there under the $20,000, zero tax due threshold, and then just divided those two to get the average tax paid.

Go ahead, Noah. Sorry. We we we've Jim was doing a quick Google to see that Seattle has another measure on the ballot for November to go up for manufacturing to point six five eight. For service. Or for service. Right?

Point four three to point six five eight.

Wow. So neither here nor there, but there you go.

Yeah. Please continue. Thank you.

Sure. Yeah. So one of the requests from the last council meeting was just a little more information, about the average b and o tax a little bit further down in the weeds. And so what we did is we I see identified just a few types of business and looked in our database to see how many taxpayers there were and the average b and o tax that they're paying. So we looked at automobile dealers, retirement facilities, restaurants, and then that traveler accommodations would be the hotels and the motels.

And so you can just take these numbers as just informational, I guess. But the other point here is that the portion of the b and o tax paid by classification, just reiterating the point I made further, that it's not just as simple as having a retailer or wholesaler. It's often mixed very often mixed. And these are the options sort of on the table for changing the b and o tax program. The second column there shows you the impact to our b and o revenue for increasing just the retail rate from point o o one to point o o two.

And then the third column is if we raise our $0 filer threshold from 20,000 up to 500,000. We, and then the third the last column there combines those two, and they have some interactions so that it isn't exactly additive. And so, I think the next slide just oh, yeah. So we included this slide as, just an example of a very large business. Suppose we had a business that was, doing $5,000,000 of business here in Olympia, and we changed our retail rate, this is would be the impact to such a business.

So, basically, doubling their retail b and o tax for us. But the service and other all the other tax classifications don't get impacted. And then this one just gives you the impact from the three three options. We can just raise our rate. We can just change our threshold, or we can do both.

And I'll I'll add one more that we haven't talked about, which is as Jenica's gone out to start doing some engagement around this, and I joined her for one of them. But, you know, we the question was asked, well, why just retail, and why not all the classifications, some change? The short answer is retail is your big one of your biggest categories. I think service probably is the next largest category of B and O. And we did do I did ask Mike and his team to do some looking at, well, what if what if you went point zero zero two with a 500,000 threshold across all classifications?

Because the question came up, is it equitable that you're just picking one and not picking everybody? Right? There was that question came up. If you did that, I think it if you'd went to point o two across all categories, but still raise your threshold to half $1,000,000, the number is $2.2900000.0 dollars in revenue total is what that brings in. So it's an extra million dollars in revenue.

The other way I asked Mike to look at is, well, what if we just went partway? What if you just went point zero zero one five across all categories? So instead of going all the way to the end, you went partway and then and asked everyone to contribute along amongst the all all the classifications. If you did that, it's 1.2, we actually lose we lose $700,000 that way. You gain 1.2 in new revenue versus 1.9 if you go retail point zero two at $500,000 Does that make sense?

So I just wanted you to have some more context around this as you have discussions. I thought that might be interesting. And then I'll just add one more thing because I think it's the next slide that again, Jenica's out meeting right now. I joined her with one of the auto dealers and had a a very good discussion with them. And then she's has some focus groups, and she'll be ready to share all this by September 30.

So she's out and about doing all this work. She'll be ready to provide a summary. I'll just share that, you know, in the one visit I took with her, the I heard both I heard two things. I heard, yeah, it's time times are hard to have more taxation right now layered upon what the state also is doing, that are that impact, dealers, and they live in different service categories, so they may be hit multiple different ways by that. They also what I also heard was a healthy economy, a healthy city is good for business, and we would not ever want to see cuts to public safety.

So if you're telling me public safety is at risk, it's a different conversation about this. I'm never going to say yes. I want more taxes, but I care about this. And I'd interested to hear more from the city if that's where you are. So it was kind of a mixed bag. I I thought it was a very, really good conversation. It was a really honest conversation. It's only one business, not not many. So I don't wanna lay a a flag in the ground around any of that other than just give you a flavor of one conversation I had that was a bit of mixed reaction to it. So that's what we had to share with you around b and o. Do you wanna move into public safety? You wanna ask some more questions about b and o first?

So we

should hear a little

bit more about this across the board because we we just we haven't, yep, had conversation about looking across the board. Maybe just a little bit about the rationale for focusing on retail initially and where you think there might be big concerns or or big pushback on across the board.

Yeah. I'll start, and then others can others can jump in. I mean,

The

packet came from Owen with a cheerful note. I think day before yesterday

Thank you.

Or or yesterday morning. Sorry. Okay. Now we're we're all on the same page.

Yeah. You're good. So, again, I think retail and service are your are your two largest categories, and we looked at ways to close the gap and where you could close the gap. The what you get out of most of other categories, as you can tell by by the math that they did about going up just partway with all of them, you don't gain the same ground that you do in terms of trying to close the gap by looking at retail and service. But the short answer is we can look at all of that, and counsel has lots of flexibility at decision making point.

You can see, going back to Brandy, some have affected service, some have not. Some have raised service, some have not. Some have raised commercial. On the commercial side of things, manufacturing, we don't have a ton of big manufacturing facilities here in Olympia, so there just isn't a lot there for us where there may be. Like, for example, Lacey has, out in their Hawks Prairie area, put a lot of that in, so there may be more there for them than there is for us. So I think, truthfully, that's kind of why retail.

And just to confirm, that would not be a change to our service because that's already at point two. Correct? Okay. Yep.

Any other question or discussion of b and o before we move to the criminal justice sales tax possibility? Randy, Thomas, thank you both, and we really appreciate your special name tent, the tax review team name tent. That's impressive. Yeah.

Okay. I'm gonna lead off here, and then, you know, Mike's actually been doing a lot of work here too, so I'll let him jump in. I told him to jump in wherever I get it wrong, to make sure we get you the right information. But, in the legislature this year, they established two new funding programs through house bill twenty fifteen to help cities, with the cost of rising costs of public safety. One is a three year, dollars 100,000,000 grant program.

So what that does is it offsets the costs of hiring and a portion of salary up to $125,000 per hire, because it can be alternative programs. It can be line level officers up to $125,000 for three years. But the $100,000,000 is total statewide, is the grant fund, grant pool of funds. The other is a councilmanic oneten of 1% local sales tax. Enacting the new oneten would bring our sales tax rate to 9.9%.

So we're at 9.8 now. It would bring in about $1,500,000 of revenue just for 2026. And the reason we say that is, as you know, we've shared this before, we have to get through an approval process through CJTC. Then we have to have a ninety day notice to DOR to start collecting, to change the collection rate. So we're being conservative saying, if you said yes today, that it may be midyear before we actually start receiving our first pieces of that sales tax.

And then by the time we get to 2027, you could benefit from a whole year's worth. So that means that we will have to factor that into this year for how we balance. We may have to plug the gap with some onetime monies to get you through the first year if this is something that you want to do. But it's roughly $3,000,000 We've also estimated about a half $1,000,000. We're being conservative, for grants we could go after.

We do have there's at least nine vacancies in OPD right now that we believe would qualify to go after this new grant revenue. But you have to enact the oneten of 1% in order to qualify for the grant. The grant's not available to you if you don't enact the other. The thought process here, as the legislature wrestled with this, is providing some grant but knowing the grant money isn't forever and providing a longer term funding source to help cities over the longer term. So that $05,000,000 will help us over three years, but then goes away.

And then we bear the full cost of any of those officers hired with the grant. So again, there's roughly, we think, about $3,500,000 worth of revenue here between grants and the oneten that we think could be available for balancing for 2026 and beyond if you said yes here. This does require counsel has to take an action to authorize the tax. Then that has to go through CJTC. They have to do an evaluation to say, have we met all the criteria?

We feel pretty strongly that if we're not there, we're pretty close to there. I just talked to the chief this morning. She feels pretty good about where we are. She got some clarity last week from CJTC on a few things. But if they deem we're not ready, then they'll give us what we need to do to correct.

And we have six months to correct, and then we can get we can go check-in again. Another reason why we have a half a year worth of sales tax revenue here is just, again, being conservative to give us some time to make sure we're meeting criteria and have time to correct if we need to. But that really is the basics of the public safety sales tax piece of this. Other than I wanted to share with you, we asked ourselves, well, what could we fund with an additional $3,000,000 worth of new revenue? So I sat down with police and fire chief and others, and we went through the portions of our general fund budget that are funded by general fund that don't have a corresponding revenue offset.

So are things that we've added, for example, throughout the years to advance reimagining public safety, to advance our public safety strategic plans, to get at response times in the fire department. Like, we'll think for a good example of that is the CARES program. But these are the kinds of things that we see as what would be covered that are public safety related if you passed a new $3,000,000 public safety sales tax. It would close these gaps in the public safety system that we currently have. And then the other thing we did, then we asked ourselves, because I think this is also really important, what are all the other things that over time we've been trying to fund and we just have not funded yet?

We've not found a good ongoing way to fund. We still need to fund emergency management. We're we're making it work with the deputy chief, but it's not the preferred alternative. There may be an option in there. I'll just float to share a position with Tumwater. That's something we've talked about. We we don't put enough money away for apparatus, air packs, radios, bunker gear. Council have seen this on one time year end lists every year. We should be putting about 1,300,000 a year every year to make sure we have enough money when the time comes to buy new trucks and equipment. And you can kind of see down the list here of of other things.

We we would like to expand walking patrols. A conversation we've had with the downtown Could really benefit the downtown if we had two shifts of walking patrol, not just days, but we had days and a second shift. And we've had those conversations. We really need, in the future, a third aid unit. Our domestic violence unit is something that we pull together.

It's really important for us to have those programs, but we don't have an ongoing funding source for it. And then neighborhood policing is something that you've heard from both the chiefs. It's something that's part of our strategic plan we'd like to continue to expand. So to me, I see about $6,000,000 worth of need that we still have to get at. This first $3,000,000 helps us close gaps. But I think it's important for the community to see that even beyond that, in the long term, we still have more holes to fill within our public safety system. So I wanted to give you a little bit more, because we didn't have that the last time we were in front of you, a bit more for you to see around that for the community to see. So I think that's what we have on this one. So I'm gonna pause and see what questions you have about this.

Sales stats questions. Go ahead, Kelly.

So as a reminder, the grant would only be for new stuff. So if we added that, then in three years, you could argue that's on one of these lists as well?

You could argue that's on one of these lists as well Other than the nine that we think would qualify are in your baseline right now, we would we would just we'd we'd benefit for three years, and then, yes, then they'd be back they'd be back fully here. So we didn't put them here because they're these are things that are not in your baseline right now. Those officers are in your baseline. So we're planning to hire them whether we get a grant or not. Does that help? That's a great question. No question. Is our public defense program fully funded? Because isn't there new standards for them? I think it's back one.

Oh, it's on the first I sorry. Was I was jumping between. So that was on the first page.

Yeah. So Okay. Right now, we that's new last year, and we plugged that in here because that is a gap. It's an unfunded mandate. So we plugged that in here as

a gap to fill. Got it. So you have 3.3 here and then an additional $3,000,000. 3,000,000 of wish Yes. Or well Mhmm. Yes. Need. Need. Yeah. It's need. Okay.

I mean Yeah. We're already in your baseline right now funding some capital replacement, and you're also can you go back to the next one, Owen? And, you know, we're buying the bunker gear whether we set money aside for it or not because we have to in the air packs. And right now, the the world that the fire chief lives in is I gotta fine cut somewhere else to make that work. Yeah.

And that's just not where we wanna be. So that one, you know, we're we're course correcting in this budget. The one of the things that is in your baseline that makes up part of your gap now is I had them add in things like bunker gear and air packs already because we we have to find a way to fund those things. When we get deeper in your budget, we have some trade offs and things we can talk about. But some of that's there, but it's it's it just contributes to your large to the gap that you have right now. Was last year's ballot measure from the county three tenths or one tenth? It was two tenths for them, one tenth

for us. We got one tenth of that two tenths.

Yep. And we're using that that one tenth to hire the additional offers officers based on chief Alan's presentation he did with you around strategic planning work

Okay.

Based on the amount of officers, the work that he did that what we should have versus for a population our size versus what we actually do have.

So our our taxpayers are paying four tenths to the city and two tenths to the county, all for public safety?

Mhmm.

Yeah. They're they are correct.

Okay. Well, if if we do this

one If

we do.

That would the fourth tenth.

Yep.

Okay. I'm just trying to make sure I'm track and so so I hate to even ask this, but I feel like we should step back from all four tenths and make sure that it's in the most flexible places that it could be like you've done here. But I don't know that I necessarily need that because you've started adding some f's into this these spreadsheets because of the we've keep keep bringing money in that's helpful for OPD and OPD adjacent programs. And getting to some of our fire needs is is significant. So I've I've this this is really helpful for me to see kinda what you're thinking is how is how you would expend it.

And then I would just maybe suggest that not in budget crunch time, like, pre budget next year, taking a minute and just stepping back and looking at all four tents. How are we using them? Because one time, we promised the voters that we would never change it. Right. Because they were just because that was, like, a sticking point for them. Yeah. But have we, and are we able to say you know, I I think it would just be worth a special time bit bit of time to look at that holistically.

Yeah. I mean, a good example of that is your 2015 measure that funded some public safety items. It funded walking patrol. It funded crisis response unit. You know, what you'll see, it funded the baseline walking, excuse me, crisis response unit, which operated during the day. We've since expanded that. So it's working in the evening. Done a butt. We've got a walking crew. Right? So that expansion, the total of that expansion that we've done that's that's outside of the ballot measure is is a little over a million dollars.

Right? $20.15 is the one we did with the home phone. It is. So then the first one was, like, $20.13 or 12, maybe 12? Maybe. Maybe. So that's the one I can't remember what we did.

Yeah. So and we have we have all that. I I know Joan has it. I asked her all the time. Hey. Go back to this one. Remind me all the things that because we we've kept those fences around those things. Right? So that's why, you know, at some point in time along the way, when we show you where reductions, what they might look like, you won't see things like walking patrol or the baseline crew or any of those on that list because the voters said we want the revenues to go there. So we're we won't put those up.

So it means we gotta look elsewhere. And one of the things that know, even with OPD, what gets police and fire are the largest two pieces of your general fund budget you have left. OPD, between ballot measures and the other tenths of public safety percents that we've passed, there's fences around a large portion of OPD's budget. So there's what it is, and then there's what's not protected. Some of what I've shown you on that prior slide is that group of things that aren't protected between police and fire by other revenues.

My only other question is whether you can show me the ten year line, including these two revenue sources and without them.

We we started to work on that. We are intended to have something for you as we get a little further in the in the budget balancing. I'll tell you between here's what I'll tell you. Between what we did last year with reductions and these new revenues, you come pretty close to mostly closing the gap, and we get into what I'll call a more regular deficit area. We still have the same structural problem that we have, that our expenses are always going to outpace revenues with the restrictions that we have.

But closing this last 4 to $5,000,000 gap that you have puts us more into a more regular cycle of what our normal budget normally looks like, if that makes sense. Right? We're always starting in a deficit and working around it. I think long term, you're still gonna need something like a levy, the lift or something. This buys us quite a bit of time, though, however, before you have to get to that conversation.

Do we know, if if this one tenth of a percent brings us up to 9.9 in the city, Do we know if there's anything pending at the county or the state that will, come in this next year and bring us over 10? Property, but

not sales. Yeah. I know that the county is considering public safety is the same one tenth that we are. So are the other cities, but not this this year. I think the county is more imminent considering it than it's not part of Lacey and Tom Waters' conversation at the moment, but it may be.

But in terms of what people would pay in Olympia Yeah. If the county adds another if if they also enact this, then we'd go to ten ten point o.

Theirs is just outside.

It's just outside. It's just in the it's just in the urban growth area, would it be affected by whatever the county does layered on ours?

Oh, okay. Interesting. So they their taxes don't apply inside Inside cities.

That one.

The other one.

Yep. Yeah. Okay.

Okay. So it's just So we'd stay at 9.9 city proper. So long as there's not an increase in the state rates. Yeah.

Can you say more about your confidence that this buys us I don't remember your exact phrase, but like the implication was a little bit of time. I like I look at what's happening with all municipal budgets, what's happening at the county with you know even just within organizations that I'm familiar with where expenses are just flat out outpacing revenue to a pretty wild degree. I just wonder how yeah, tell me how confident you are that that would actually buy some time.

Right.

Yeah. I mean, the the hard part is the the hardest part of all of our job, and this is the forecasting piece. Right? And to try to figure out what we think is gonna happen with the economy, what we think is gonna happen at a fed at the federal level with tariffs and things like that, how that drives things, what we think is gonna happen with the housing market, and how that drives up costs. And, it's speculative, and I think that's the world we live in.

What I know is is that when we balanced our budget last year, we were left with a hole of $4,000,000 that's grown probably to about 5 or 6 with increased costs. These new revenues close that gap. So if if we had them if we if you had enacted them last year, we would have started our budget balancing $22,000,000 out of balance this year, which I don't think is a place I've been at in quite some time. And the work to close at a a $2,000,000 deficit in a in a $200,000,000 budget is a lot less difficult in how we move things around, how we make estimates around revenues, how we can make that up from year to year. COLAs aren't going to be 4% every single year.

They have been for the last few years. Part of what's created is and I'm not complaining. I think it's great for employees. They need to keep pace. But that doesn't happen year over year.

I feel confident that with the changes this year, either to make further reductions or to add new revenues, aren't going to put us back here next year saying, hey, we got another $6,000,000 gap we're trying to close. But the structural problem of our budget isn't going to change, particularly the 1% cap on property tax, isn't going to change. So it's never going to keep pace. So we will be back here again at some point in time, but likely not in the next three, four, five years. The other thing I'll say is anything that you do in revenues that countsomanically is less that you may have to ask for in a levy to lift in the future.

So if you made an adjustment now, if you did make an adjustment to revenues and we were you know, you may have to ask for $0.75 or more on a levy lift to get the equivalent of what you need to close your gap. With new revenues, a future levy lift could be reduced to a quarter. I'm kind of talking on the fly here, but the point I'm trying to make is any offset that we make to close gaps is less of a lift that we may have to ask in the future. And I think that's important to think about, because legislative is property tax. These other are business and sales tax related.

It's a different type of tax. I think we've all heard over the years people's thoughts around property tax versus other taxes. It's a harder ask. Does that help? And I don't know. And, Mike or any Mike, if if you wanna add anything to what I've just said, please jump in there.

I agree with Jay. It's so difficult for us in forecasting to always know, you know, particularly what the economy is going to do. We know and can pretty well predict our expenses. We know those are going to go up. We don't always know how much in around what parameters such as tariffs or increases that we've seen in the last five years.

But I agree with Jay. I think that with these revenue options, we're in a position to be able to balance in a more reasonable fashion. We can make some adjustments around how we operate and bring the budget in. I think one of the considerations is if you bring these two revenues in as a council, it also allows us to keep some of our reserve above that minimum 10%. And that's an important buffer that I'm just going to bring up here that that then gives us that insurance, if you will, that in a downturn, we have somewhere to go.

But if we use that amount above the 10%, we really have nowhere to go in the event of a downturn in the economy. So that's another, I think, advantage to bringing these revenues in sooner than later.

And I'll just add, you know, I've been working on the budget. This is my sixteenth budget I've worked on between being a city manager and assistant city manager, over the years. For ten of those years, we balanced using a 10% reserve. We never had anything above the 10%. Those of you who've been around a while know that, right?

But if the recession taught us anything, it's to have some more flexibility to manage peaks and valleys. So a good example is because we're we're right on the wire with a budget gap, you know, as soon as I saw we were running $200,000 behind in sales tax, it said to me, we've got to put a spending freeze in place because we really can't afford to lose any more ground than we have. In a normal year where we aren't staring at the gap that we have, I might have let it ride out a little bit longer because we have reserves that can help us match and pace with that $200,000 And if we ended the year and we truly fell $200,000 behind, that's what your reserve above 10%, it helps you manage those peaks and valleys. And then on years where we're better than we thought, we continue to build the fund balance. It it helps us ride in that way.

And I think that's the value of having it and my nervousness of, if you were to ask me honestly, my nervousness of using all of it. You should at least keep some of it above your 10%, if possible.

What's that balance above 10% this year again? Remind me.

Right now, we're still balancing. It's about 4,000,000, but we've got some work to do. So I'm gonna say it's probably closer to three, maybe two and a half estimate estimated.

So I I just wanna check my my understanding about the the levy lid lift piece. I know it's not central to this, but it's it's like in the background is Kelly's question about if inflation is outpacing our 1% revenue increase by 2%, 1% of our if if it's roughly a 160,000,000, is that for the total budget?

190? So Your general fund general fund.

One fourteen, you think?

Okay. One One yeah. One fourteen general fund, and then it gets up there with utilities and stuff. Yeah. Development fund. Yeah. Okay. So that's 1,140,000 is one percent. So if we we could be looking at just over 2,000,000 per year if if inflation is outpacing that revenue. Right?

And and then we hope for construction. We hope for good retail for for other taxes, but that's the so so I I also wanted to be reminded. One of the options I understood in looking at a levy lid lift was that we could put, an escalator in that would would tie future increases to cost of living increases, something like that. Yeah. We talked about that. I I I don't know if we're gonna be if we're able to do that. I think it's a question

that was asked whether we could tie an automatic escalator. Right. I don't I don't know. And, Mike, I don't know if you guys know, but I I don't know that you can do that.

I don't know that you can either, but certainly when that time comes, we'll gather the information so we can inform.

So, otherwise, the the levy Ludliff going to a vote is also a temporary fix that eventually the one That's percent correct. Half the cap will eclipse Your levy rate

is always going to

eventually follow.

As long as there exists the 1% cap on property tax, even a levy to the lift buys you more time. But probably about five to six years after that, you're probably going have to look at it again.

Can I just say I read an article in today's newspaper that the county is looking at going to the voters for a six year measure? That would be one. Doesn't say the percentage in the first year, but in the years two through six, it would allow up to a 6% increase based on CPI.

That's good. Yeah. And we can look at that. So if we can write it that way, yeah, that'd be good.

Anything else on this sales tax measure before we move along?

Well, the other thing I'd offer too is so let's kinda map out your calendar a little bit as it as it exists right now, kinda how we thought about this. Initially, coming out of your August study session around revenues, we were gonna be here tonight to to put the revenues in front of the finance committee and kinda get some direction that we can take to the full council on the thirtieth about where the finance committee is in terms of these two revenue options, one, two, or both. And then on the thirtieth, we bring this similar conversation to the full council along with, the thing that I'd add to this is what does $5,000,000 in reductions look like? Now I'm not gonna put them in a priority order. I'm just gonna show you what five because because if that's where you wanna go, we'll have to we'll spend some time on that.

So you can see the areas that would be impacted with $5,000,000 worth of reductions, if that's the choice point that we made. I think it's important that you see that, because I've also heard that from some of you. It's hard for me to say, I don't know what's really at risk yet. So I may be hearing over here opposition to be an o, but those folks don't know what this looks like if I don't. And maybe what this looks like if I don't outweighs the concerns that I have about if I do.

So I understand that, and I think that's an important piece. So we're gonna bring all that on the thirtieth. So you have all of that. And then we have a study session on the fourteenth to really dig into all the parts and pieces of the budget. One of the things that we thought about, Clark, after I had a conversation with you is, and this is why Stacy's here prepared if you wanna talk about it, is could there be some special meeting in between between now and the thirtieth where we could take counsel through a conversation around kinda what's important to you, what sideboards you would put on this conversation?

So for example, one of you might say, well, I don't really want new revenues, but I don't want cuts. I don't wanna see any cuts to public safety. Right? So that's a value I have. And we might have to show you that, right, if you did one, we could get there. But if you do none, it's an it's it's impossible to say no new revenues and no cuts to public safety. And I don't know, Stacy, if you wanna say more, but it gets to your point, Clark, about do we need more conversation about where everybody is before we put proposals in front of you around revenues?

Yeah. This is with everyone knowing that the gap is 3,000,000 more than the revenues would bring in? This is no. This is new to all people. Know this yet.

This not This is the first time that anybody's seen it.

Thank you. Because to me, that dissuades needing to go to the next step, but I'll I'd be happy to hear it.

Yep.

Yeah. So I'll I can go into as much detail as you want, but I just built a framework for a conversation around what I felt like I was hearing with some of the objectives, so just as Jay talked about. So it sounds like, you know, one of the key conversations would just be, you know, what would be your goal for this year's budget balancing? And so really kind of honing in on, are you looking for long term solutions, short term, or a combination combination of both? So is this, you know, is this an exercise to bridge to something future, or are you looking, you know, looking at that ten year and trying to make, you know, more sustainable reductions.

So that'd be a place to start. The other thing that, you know, I heard is there's really kind of three buckets of conversation. I mean, one is around reserves, the other is around potential new revenue, and the other is in, you know, reductions in expenditures. So I'm not thinking of designing something super complicated, but just enough intention and structure to have a chance for you to each kind of talk about what are you hearing, thinking, concerned about. So within each of those, it's an opportunity to start with, what do we What does that mean?

And then what might we want to do about it? So you'd think about we'll take reserves as an example. You heard a lot tonight of just kind of level setting around what we know around our reserves, what our policies are, where we stand currently. So we would be able to provide that information. And then you have an opportunity to have a conversation around what are the concerns, risks, or potential impacts to kind of surface those, you know, as a council.

As Jay mentioned, if you can narrow where we can focus so we're not bringing a whole world of options back to the next meeting, but if we know something's off the table, you know, that would really help us, you know, have additional guidance. So same way in terms of revenue, you know, what do we know? What are some of the concerns, risks, or potential impacts? And some of those we just fleshed out tonight. So this could be a conversation well, it should and I'll, you know, really be a conversation which staff can contribute as much as you y'all.

So you can ask your questions. We can provide the expertise. But you also have an opportunity to talk about kind of what you're hearing and and concerned about and seeing out there. So and then lastly, it's reductions and expenditures. And I think, as Jay mentioned before, we would put specifics in front of you.

We we have the ability to give you some context or kind of shared grounding information. So, you know, Jay covered it tonight, but just a reminder of what those 2025 reductions were. We talked about providing information around what commitments have already been made to the community, whether it's via an initiative or, you know, any kind of what's the not an MOU, but a Interlocal. Interlocal agreements, you know, etcetera, right, that you may wanna continue to abide by or need to abide by. We can also look at, in terms of programs and services, staying at the program and service level, a conversation around what's mandatory, what's state federally mandated, what have we self mandated to do?

And what's not. And we can, you know, provide some information around what we know of potentially we we need to do as a city organization and what maybe others might be able to do. So these are some example oh, I say the one other one is that, you know, we've been having conversations around what programs and services have been added since 2020. So you have an idea of kind of, you know, where how we've been expending general general fund revenue since that time. So those are some examples of kinda some just grounding or background information that may then support you in a conversation.

May I add a little bit? So my here here's what what sparked my but besides hearing concern from several colleagues about how we're moving forward, First, this is not a philosophical there's not political or philosophical differences here. This is just a difficult set of good government management decisions. Right? So the idea about trying to win each of these as a divided group doesn't make sense to me if it's possible to to bring people together and and make a a shared decision on these.

I I think I think in the, you know, the hierarchy of an executive making a decision up to consensus, this is pretty high up that that chain of super important decisions that impact many members of the community. And and so so that's what what made me initially want us to just pass the staff recommendation, bring it as a a finance committee recommendation, and then to reconsider when I heard one of the questions I heard was, how do you know this is the rainy day, and what's your guess of how many years a recession might be in terms of both the reserves and when or if we would begin to make cuts? And, I mean, we all know that there's not there's not a crystal ball to predict that. So then, you know, that that's what in what what made me wanna make sure that folks feel consulted and having a hand in the decision. And I think coming armed with a lot of the information that you're offering there, but letting council members speak and then having a conversation together with staff to to answer those questions and concerns.

That that's, you know, that's that's my hope, but I'm I'm also one of three here, and I'm, you know, really open to which way because, personally, I I I, at this point, really think that seeking both the the b and o change that we'd originally proposed to retail and the the criminal justice sales tax and being willing to use reserves, like, for me, I'm willing to take that risk of how long this recession lasts or whatever and and try to move forward. But I I I just I don't wanna it doesn't doesn't feel like it warrants dividing the team over a decision that's that's really not about politics. So there there you go. That's I'm stepping down off my soapbox and glad to hear from both of you.

Look. Can I I just get

I wanna check my logic on something? If we did both of the revenues, then we would no longer have reserve over 10%. Right? Because the extra reserve would go into making the reserve 10%. No. If you did because the 10% growth. Yeah.

So we factored in the growth of the 10% reserve for 2026 into the numbers that we've shared with you. So this two and a I'm I'm gonna call it two because I'm gonna I'm gonna be even more conservative. Change my notes again. But let's just say we have $2,000,000 above the 10%. You pass both the revenues, as far as we've gotten in the budget, we think we can bring you a budget to balance that does not utilize any of those reserves above your 10%.

So you've already put the new reserve amount into that number.

We have. And that's where the that's where the 2,000,000. The 2,000,000 is is over and above your new your new 10% that's based on that's the new budget, the new 2026 budget. Okay. So we factored that in, and we think we can get there without touching your reserves. Now if and I'm gonna go back to something Stacy said. It also where we are and what what what our thought process is is also important. So if you're bridging to something, bridge into another conversation. Maybe it's a levy that lives a couple years out from now. Maybe it's it's some other conversation that we wanna have.

Maybe it's letting us get farther into PBB. Who whatever the reason is, then that's a reason to use some reserves because you're just going to use some one time monies to buy us some more time to get to another conversation. So my best example of that is if you pass public safety sales tax but you said, maybe not B and O this year, but maybe B and O another time. Right? Maybe the time isn't right for B and O. That's a using reason that you might wanna use some reserves to buy you some time to that conversation. If your conversation was no not no to be a no, and we don't even wanna see it again. Right? It's not an option that we wanna pursue. Then that's the place of we need to make some permanent cuts to fill that $2,000,000 gap.

Like, that's that's the choice point we really need to be at. Because, otherwise, you're if you use reserves, you're just kicking this can down the road, and we'd be right back here chasing that same $2,000,000 next year. So, you know, to me, if if we're bridging to something else, that's a way reason to use reserves. If we're not, we should make the reductions.

K. That's good.

Can I just check my math? Just I ran out of fingers. What else? So it's about 5,000,000 in new revenue, so 10% of that would be 500,000. And we're

no? The 10% reserve is based on expenditures.

Well, assuming the budget is going to increase about the same as the

We're saying we're saying that the general fund budget expenditures is one fourteen.

Uh-huh.

Doesn't matter how much revenue you brought in.

Well, I would say we'll probably spend it if we bring more in

Oh. Because the gaps are in that Expenditures. General fund expenditure. Well, that's it's short $7,000,000.

It's short. So so my my question, when you were asking about whether the reserve factors in an increased budget, that that means the 10% increases. I'm just saying we have approximately 5,000,000 to play with if we do both of those new revenue sources, and that's like a half million dollar impact to our goal of our of our 10%. Right? So it's it's not it's we're talking in the ballpark of 12 or 14,000,000, it's not gonna change the math Correct. A lot. That's correct. Million dollars.

Now you got us. That's actually more of what I needed to hear than what he said.

So thank you. Yeah. So it's it's important that we account for here for you. But on the scale of $14,000,000 in the bank, half million here, half million there. Yeah.

Yeah. That's why Jay started at 3,000,000 and dropped it to 2.

I just wanted to I just wanted to

check because okay. So then my other question, and then I'll get to a couple of comment thoughts is a little bit remedial because I apologize. I I only have read the mediocre article about how much money we're gonna save from AI from the finance committee meeting. But what I but what I'm missing is what are the next steps for priority based budgeting? And how does that because because, like, as I'm sitting here, I'm thinking that whether it's long term or short term, whether we use reserves or revenue or or whether we're doing more cuts, those are part of how we're gonna embed priority based budgeting into all future budgets. Right? They

are. So I'll just say this. It's not $28,000,000. So, you know, because the, you know, the article that was written was was kinda tough because Debbie was a question and answered it on the fly. Right? But the short answer is the tool just identified possibilities, not actual reductions we could make. They identified. They said, hey, here's a range of possibilities and the range of what other cities have found across the times we've done this. We're vetting that right now. It's gonna take us some time to get through that and probably into next year.

I don't I don't believe, based on what I've seen, it's in the millions of dollars range. We might find a million, maybe, if I'm being really generous, get to $2,000,000 worth of stuff that this might show us as real things that we can do outside of privatization, of any of your anything that we do. Outside of privatization, just when I think about general efficiencies, we've looked at it. We've found about 1,000,000 right now that we need to vet. And I'm not counting on any of that to balance your budget for this year.

So it may buy us some capacity going into next year, but I think we're gonna need that million or two just to continue to work on the rising cost of things over time. We're gonna need to continue to look at efficiencies. But I don't think this is something where we're gonna find $5,000,000 worth of worth of stuff that's going to close this gap. I don't. And I don't think any of us do. And Debbie, I'll let you jump in there.

Yeah. Thank thank you for the question because it's come up quite a bit. You know, the the report, again, is an opportunity to generate ideas and thinking. It also generated ideas of things that we have already done over the years. And so I see the savings that are identified as incremental savings across a lot of different programs and a lot of different departments that add up to something. But there isn't anything in there that says, if you do this one thing, it will save you $500,000 It's a lot of little things that are really important to do to just be efficient and effective. But yeah.

That's super helpful. I actually wasn't asking because I wanted to, you know, use it to save money. I was asking because I was wondering if it's already done some of this work around knowing what we're required to do versus what we want to do.

Thank you for that.

I don't need another discussion if that's done.

Thank you. So it Debbie, I'll let you take that because it has been done.

Thank you. Because I'm pretty excited about this. It we have allocated the resources by the programs, and so we know what what personnel costs are and non personnel costs are. And I was able to run a report today that talks about the programs that are mandated. State and federal, self mandate, no mandate. And I can crosswalk that with is there do others provide this service, or could they provide this service? So we're starting to be able to see the data in another way that is really helpful for these conversations.

That's cool. Because I think that that's what I would want to drive a council discussion, not a blank page open not an open ended question. And so if we can have that, then I'm okay with the possibility of council discussion. Like, if we can get more people there, that's that excites me. Tuesday of this week this next week happens to be an open day where we don't have a meeting.

But I don't know that how else we might get it in by the thirtieth. Just looking at my own calendar. So I believe that we're here for long term solutions, and I believe that every time that we do something like this, it should have some balance of the three. But I also feel like we did a five year five years worth of cuts last year. Like like like, we don't always take a big bite like that.

And so if you if I look at last year next to this revenue, that feels like a good balance to me. But if there's a handful more cuts that you're still gonna have to close 2,000,000 more dollars. Right? So you're gonna bring us $7,000,000 worth of cuts, but maybe you focus on the top 2,000,000. Right? And and that feels good to me. And then I really like just using a little bit of reserve in, like, the example you used around sales tax. Like, we're 200 short. Let's backfill with 200 from reserve. And let's start like, that's that's that's what we do with that reserve amount.

Like, fill small things, but we can't fix systemic problems. I think that both of these help alleviate systemic problems in the city budget over at least half a decade, but really forever. Right? They just decrease the need in the long term. And I have to say, like, I am fascinated by the idea of looking at going to point zero zero two on all of our b and o and wonder if we could do that and bring the threshold up even more.

Because if you go to $2,900,000 in revenue, that's, you know, point nine above what we were thinking about, And maybe we could alleviate even more businesses, more smaller businesses from having to pay B and O tax. But maybe that's a threshold where those business I mean, based on the numbers I'm seeing you showed me and I've seen in this conversation ongoing, like, maybe that's trying too hard. Like, we're not pay the businesses are not paying that much when we think about what the percentage of their overall revenue is. But I do think that it's prudent for the city to move forward with both options. And if we need to have another opportunity for folks to talk about it and try to you know, I think if we can give a little bit of a balanced package that shows that there will be some cuts and some new revenue and a small amount of reserve to, you know, balance it, then I think we've probably met everyone's needs.

I'd I'd rather bring a package like that than have another meeting, to be honest, but that's just me.

Alright. I have a lot

of

thoughts. Can't promise they're going to be in a logical order. You know, in a lot of ways I'm in a really similar place to where my fellow council members are. Think a couple of things that come to mind for me. Personally, I'm not in favor of continuing to use reserves for anything. I think they're there for absolute emergencies. And I think again, we're not alone. Many municipalities are doing this. I just think it's poor practice to year over year say, well, we'll just do this one more thing. We'll just do this one more thing.

I think the reality is we have to at least look at what those long term solutions are as part of this discussion. I'm much more skeptical. Like, I appreciate that you and Mike are the professionals in this industry, but I'm skeptical about the longevity of some of this. I mean, Councilmember Cooper, you just said that last year we made five years worth of cuts, which I believe that that's what it felt like. But here we are a year later, and we have as much or more of a deficit as we did last year.

So, while it feels like that in terms of scope and the human cost, the reality that we're seeing with how quickly expenses are going up is that unfortunately that's not, that didn't buy us as much time. Like nothing in recent years has bought people as much time as they thought it would. So I'm just really skeptical about that. The other thing I'm thoughtful about, and I really appreciate, I do think there was some great information today that we haven't seen even though we have been talking about particularly the B and O for a long time. But, you know, how many conversations have we had in this community that ultimately come down to affordability?

And every time we do something that raises a tax on a business or a sales tax, like ultimately it's regressive, right? Like business is going to pass that on to consumers who day to day are going to feel it. And so I just I'm thoughtful about that. So I feel like we have an obligation to look really seriously at what is the alternative. What's the reduction alternative?

As awful and ugly and stressful as I get that it is, I think that is we have to be clear about what it means to say, if we're going to do this, it's to save these things, or vice versa. I think just doing it without that information would be dicey. And you've already acknowledged in this presentation, you know, there's potentially $6,000,000 of public safety stuff, aside from if we do the tax and take the grants and add more. I mean, again, you know, that's all long term stuff. And so that's why for me, looking at the long term has a lot more value than just looking at how do we close next year.

I also think some of I mean, I'm excited to hear that piece of PBB, and I really would like to hear that, because I know think Jay, you dropped the ugly word privatization. But it was in my head as well, as I think part of the long term has to be again, not to say we would do it, but what does it look like? What are we doing that in theory, you know, we may not be doing as efficiently? And again, that's I'm not in favor of that. But I you know, I think those are the things that we just we have to look at when we think long term.

So yeah, mean, I agree. I think the problems are really systemic. I think we have some solid options here. But personally, I do think we just really need to look at the long term. And we need to be really clear about if we're going to do this, what we're trading off. And be realistic about, you know, again, I just don't think it would buy us as much time. Like, I just don't know anybody in any industry who's feeling like expenses are going to slow down, or you know, our community is magically going have more money in their pocket to increase sales. I mean it just, you know. I guess I'm at a pessimistic place in my life when it comes to the economy.

Jobs. Comments.

Yeah. And then the last point I'll make is just when I went back and looked at the slide you had really early on of what the community said were the five top priorities, I think I think those we should approach this kind of with that angle of like, if these are the five top things, then what are the other things? And again, it doesn't mean they're not important. But it means if the community has said and I think counsel has generally agreed that transportation, public safety, climate, homeless, economic development, if those are top, then let's approach this with that in mind is that yeah, go ahead.

And I'll just say, because I didn't talk about this as part of our work last year we cut everything we could to not touch those things. And that's the work we did last year. That $3,200,000 I mean, we took a million dollars out of transportation, public works. The biggest reduction in any department was out of public works transportation. You couldn't take another $1,000,000 out of public works transportation without cutting back dramatically your maintenance and the work that we're trying to do to move projects forward.

So I think, you know, Kelly, that's a really important one is that we did a lot of work hard work last year to try to cut things that didn't touch those priorities. And I think this this year, if I had to put $5,000,000 on the list, there's no way to get to $5,000,000 without putting some impact in some of those areas, not complete elimination of everything, but some impacts in some of those areas are are are the only way you get there without some offset. And I think, you know, we did some hard work last year to to cut first before we looked at revenues, we were strategic in that. And I think now we're just at a choice point. And I think we've been talking about a $10,000,000 gap in our budget for the last few years, and we picked a way at it last year.

And we knew we were gonna have to do some more work this year. And it's hard. I'll just share my perspective. I'm sure you all feel it too. It's hard to be here every year wondering and our employees are wondering year to year, is this the year I lose my job, or is this the year I don't?

And at some point in time, however we have to do it, we have to close the remaining gap. So that even if it meant reductions, for everyone that's here, we're not talking about it anymore. And we can move on to doing the business of the city of Olympia without being hindered by this big block that's around all of us that's really difficult to wrestle with. So however we get there this year is my message. We've gotta get there so that we don't find ourselves here next year at this finance committee having the same discussion about what do we do about this. Yeah. Yeah. It'll be a different finance committee. That's true. But, anyway, that's just my my two cents of it. It's just really hard work on and I I see the impact on all of you.

Yeah. I appreciate that perspective, and and that triggered for me. The the other thing I wanted to bring up is, you know, we've heard periodically throughout this year in different presentations, there's areas where the city is arguably understaffed. Right? Administrative support other places. And so, you know, that weighs on me as well as much as looking at the you know, some of what you shared today is there are these other costs that arguably will be essential at some point are really critical. And so, there again, just all to go back for me. I think I don't see value in looking at just short term fixes when when these are systemic long term issues.

Kelly, would would you be willing to to weigh in on what you think tonight? Do do we make a recommendation from this committee to counsel that's that's for the presentation on the thirtieth? Are are we there? Is is does does the idea that Stacy described of having a a broader conversation with our colleagues warrant attention? Can you speak to that a little bit?

Sure. So, you know, the recommendations and there's a slide here near the end that has some options on it of these recommendations. I personally am not confident in saying I have a preference, only again because we haven't looked at the other side of the coin. I think know, would I personally I don't want to say have some favorites, probably. But again, I don't know what the cost would be to look at it from another angle. So for for me, I'm not ready to recommend one of these to counsel, but, yeah, you know, I don't speak for the whole committee.

Sure. And then in terms of process, would it be adequate to have the presentation fleshed out and have it presented and council members ask a question, or would you prefer what Stacy was laying out of an opportunity for council members to describe broad priorities or what sort of guardrails they would want around these categories of new revenue or cuts?

Yeah. That's that's a harder question. Yeah. I mean, I feel like we talked a little bit about that at the there was some meeting. Was it mid year retreat in August? And I think at the mid year retreat and so I I mean, I think the reason we have this committee is that it's harder for seven people to weigh in repeatedly on that. So I think I would be in favor of having a a conversation around some of this. But again, I just I'm and maybe the maybe I'm now I'm putting myself in a spot where I don't have a good answer. But again, I don't feel like I'm ready for our committee to make any of these recommendations without the full information. But I also don't feel like we need to go back to full counsel with just those broad questions.

Well, and maybe your other option six, because we try to put a lot of things on the board there. Option six is you're not necessarily recommending them, but you're also not taking them off the table. You're saying we're not taking a vote tonight to say we're taking B and O, or public safety sales tax, off the table for consideration. We're going to keep them alive. We want to see them move to the full council for conversation. And you want to see the corresponding other side of things, which should be show us what this looks like without those too so the council you as a council have everything. I mean, that's also an option six, I guess, that could be on the board.

I choose option six.

Do that more. So if we step back just a little bit, it's a $7,000,000 gap. So what Correct. What if option six is to ask the city manager to bring us the two revenue op items and $2,000,000 worth of cuts because that's the only way you're gonna balance the budget, and also show us a scenario with $7,000,000 with the cuts as a second option for the city council. Or show us yeah. Show us the 7,000,000 list, but then show us what the 2,000,000 priorities would be if you got the road.

Yeah. Go ahead, Debbie. We were talking today about tiers.

Yeah.

Maybe something like that.

Yeah. We can set it up in in some tiers so you can see it. Because I don't wanna

gloss over you closing a $2,000,000 gap not being cut. Right? Like and and it is, and it will be. And so I I'd rather, like, start at that highest level before we get down into let's leave you something easy to do at the end and not

Yeah. I appreciate what you're saying. And the reason I'm being a little I never wanna use the word cagey as a government official. But the reason I'm being a little nondescript about the other 2,000,000 is is because we're still working on it as a budget team, and it could end up being a million. Right?

And so by the time I get to the thirtieth but what I'm hearing you say is whatever that gap is by the time we get to the thirtieth, bring us the revenue if and then plus whatever reductions or other else you need to close the gap so we can see the whole thing. And then I can also bring you $7,000,000 worth of reductions. Right? So you can see, what if you just close the whole gap with nothing but reductions? And then somewhere in between, also, as you all know, there's a variety of alternatives.

Right? Well, say yes to this revenue, and then we want to take this $2,000,000 for the cuts instead of taking this revenue. Right? Or we want to take the revenues, and we want to cut an additional $2,000,000 because we want to get ahead of the out years, right, and start to get ahead of the game. So yeah, we can do that, if that's what you like to do. I guess that's kind of option six massaged.

And then talk to Jay in your one on one about whether you're short term or long term. You reserves, what balance of reserves, revenue, and reductions you would like to see because I think it's still worthwhile conversation. Mhmm. But that's just my summary of where we could go without having an extra meeting too.

Well, Stacy's gonna be with me this week in one on ones, so it's an opportunity we could we could kinda pivot a little bit and have this conversation with with counselors individually. It's then when we come on the thirtieth, we can have some semblance of kinda where we are and that that helps shape the recommendation that's in front of you, and that could help us put together a series of options and alternatives to present on the thirtieth.

Yeah.

K? I like that a lot. And I I also wonder if we might save a little bit of that night of the thirtieth to give some more explanation of the priority based how how how we're gonna use this whole effort to continue to shape work plans that because part of budget sustainability, right, is is being able to look at synergies that we might find at the total of communications expenditures across the organza it's things that these tools can help enable. And I'm I'm just wondering if there's some sort of a sketch of how in the next couple of years work plan and budget development, the priority based effort might might add fuel to addressing some of this concern about are we the right size of city government? Are we efficient as city government?

Yeah. You know? That's Yeah. The look

on Debbie's faces because Debbie's gone on vacation for a week. And so we're just trying to think about I think you're trying to think about what can we pull together for the thirtieth.

Yeah. And whether how ready for prime time it is because we're still learning it. We're still vetting some of the numbers.

And I I'm not proposing bringing that that content, but another version of the good explanation you've been offering of the power of this process and this tool. Because I because there's there's something we didn't really directly bring up, which is there's concern about, asking for new revenue. There's concern about using reserves, but there's also, a a question not just about what the cuts might be, but is Olympia City government the right size organization? Do we have the right level of standards of service across our depart you know, that that that feels to me like work that you'll be able to better describe as we go forward.

I think we can do that. I think what I'm hearing you say is more of a higher level about how PBB fits into this larger conversation we're going to have, because you asked a question. Right? So what's our work look like to vet this? I mean, I think part of what Debbie's been battling through email right now a little bit is people thinking that we actually found $28,000,000 worth right? Of And that's just not true. It's not in the vase. It's not reality. So I think what we can talk about what we think this shapes up to be and how this is shaping our conversation, how this will help us continue to get better and more efficient year over year using this process. Debbie, you want to say more?

Yeah, really appreciate the conversation because what I'm hearing you say is how does it fit into our priorities, performance and investment process? And it's a layer that helps us analyze the information and evaluate the information based on those things about what are the community's priorities, how well are we performing, and how we do our investments. And so we're able to take the data and put it in a way of programs and services really, and see the total cost of what that is, how many FTEs support that program. So I can speak to that. But I want to stay away from the actual numbers and data. Because I don't I'm still working with the software to make sure it's correct.

I I I really respect that. I actually had a long discussion with somebody last night where I was that's that was what I was trying to explain is in the next few years, this will really help us to both budget and to do work plan work, but it's not quite like take the chat GPT results and go back and tell the departments what to do. I you know?

We're doing it with real intelligence, not artificial.

Or or we're we're taking advantage of this big data dump and and and artificial intelligence analysis, but we have to run it through human beings. So I so I'm not I'm not feeling urgency that that covers the $2,000,000 gap. But I think to people being uncomfortable about long term budget sustainability that I'm I'm really proud of your your work, the the the work plan and priority work that's been going on. And this priority based budgeting is really putting a bright light on it right now. And so I think I think it's fair to offer that over the next few budget cycles, we're going to have a a different kind of more more comprehensive look at where we spend money and how what we get in return for those expenditures.

So good.

Yeah. Okay. So I'm hearing no special meeting, which, you know, I think was gonna be as I've talked to a few council members, it was gonna be hard to pull off anyway. Stacy and I will get at this in my one on ones between this week and next week. Just I'll just say in advance of the thirtieth, so we have everyone's perspective. And then I'll we will, as a team, take what we hear and try to use that to shape a series of maybe alternatives and recommendations that we can put in front of you on the thirtieth. And we'll do our best. That just may mean we roll out some tiers of ideas. Right? Like, yeah, some, you know, scenario one, scenario two.

Right? And we just kind of put those in front of you, and then and then you may, in that meeting, create a scenario six that didn't exist. Right? To Jim's point, you may massage what we put in front of you and and say, well, we want a little bit of this and a little bit of that. So I think that's what we can do. That's what I'm hearing. So I think that's a good next step. And I'll just say this because I didn't say it upfront, and I know we're all feeling it. These are hard decisions. Whether they're reductions or or new taxes, neither one of them are an easy conversation for the community, for the council, for staff, for any of us.

It's not where any of us want to be. It is just there is a structural problem that cities have with our budgets. It is real. And there isn't a way out of it. I think for five years, we collectively have pulled rabbits out of hats to make the budget balanced, to keep the programs alive that our community has told us time and time again they want to see us working in. We're out of rabbits, and we're out of hats. So we are just it's here in front of us. And and as I said earlier, you know and I think it weighs on all of us, and I think we need to stop kicking the can and and make the tough choices we gotta make so we can all move forward, community included.

Anything else on this budget topic?

I just think it's important to be paying attention because the county is gonna roll out some pretty big across the boards, and that's gonna just make everything feel more tense and urgent for people. So

Yeah. I agree. And I'll you know, I don't wanna speak for other cities, but, you know, the county, obviously, they're they're pretty vocal right now about where they are. I have fellow city managers across the state who are living the same reality that we're living here in Olympia. And, you know, our partner jurisdictions have used reserves over time to balance the budget.

They all know that's not sustainable over time. It's just it's just it's gonna it's gonna catch up to all the jurisdictions within the county in the next year or two, and that's kind of the intel I'm hearing from all of them that we're all we're all gonna be at this place at some point in time. So we're just all at different versions of it, and I think we're ahead of most in terms of the work we you you all did as council last year and we did with you as an executive team to start this process. So I just again, I wanna continue to express appreciation for the hard work that all seven of you do.

Well, the next item up is reports and updates. Any reports, city manager Bernie? I have none. Mike, do you have any reports for us this evening?

I don't either. You can tell we're deep in the budget process, the budget team, and others. So I think that's taking a good amount of time. We're also in the throes of our accountability audit with the state auditor's office. So they've identified the areas that they'll be examining, and we're working with them. We have an entrance call with them, in the next week or so. They'll also be auditing, our OMPD, Olympia Municipal Park District. So that'll that happens every other year. So it's busy, but we'll keep you apprised, and we appreciate the direction on where to take the budget now. So thank you.

I just had a question about the report, Mike, and I don't need it now. But I was just curious if the b and o graph of budget over actuals includes the work coming in from the tax review team or if that's getting held separately to show in a different place.

Oh, let me have them can you answer that for us now, if you don't mind? That would be great. Thank you.

Which graph?

In our it's in the quarter. It's the quarterly budget or the July financials that came.

All p and o taxes are reported in one.

Okay. So it's That's Okay. Cool. Includes everything. So just at some point, will you let me know how we're doing from the review work versus the budgeted work? Okay.

That's on next month's finance committee.

A perfect time. Using agenda. Thank you.

And then I would like to say that, Owen, Casey, and Sean revamped our 2025 budget document. We did just get notification from GFOA that we got the distinguished budget award. And for a long time, we have been getting, less than stellar reviews of our long term financial section, and that has actually we got acknowledgement for outstanding in that area.

So And I'll just say that's work that you all did, right, to help us kinda revisit our long term financial strategy, and we tightened it up a bit. So appreciate the work of the council on that one. So and it's great to get the word. And I'll just add in. I've seen the tax team's work. I gotta see it during the budget process. They came and did a presentation. You're gonna really be impressed. So it is they're doing some really great work with the expanded tax team.

I'm also really appreciative of the monthly reports and the the revenue stories. The tax income stories were were really helpful for me. And then it also piqued an interest for me in that parking revenues from fees and fines are down 25% year over year, and the trend line's generally down. And I don't know whether that belongs in community livability or where parking services, but there's there's some story that that numbers are those numbers are telling.

Yeah. And and it you know, we'll get into this as we get into budget. But, yeah, parking revenues are certainly down, and I'm sure they'll have we'll have a lot of good conversation about why that may be.

So thank you. It's it's really helpful, the the reporting, to to have a monthly snapshot like that. Anything for the good of the order. Seeing nothing else, we will adjourn at 05:40 on September 15 until we reconvene in a month. And thank you all so much for your work. Thank you. Thanks, Herb.