Title
2026 Preliminary Operating Budget Update
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Receive an update on the 2026 Preliminary Operating Budget
Report
Issue:
Whether to receive an update on the 2026 Preliminary Operating Budget
Staff Contact:
Joan Lutz, Senior Budget and Finance Manager, 360.753.8760
Presenter(s):
Michael Githens, Finance Director
Background and Analysis:
The first public hearing for the 2026 Operating Budget was held on November 3, 2026. As a result of the presentation of the operating budget and subsequent presentation on Proposed 2026 Utility Rates, General Facility Charges, Impact Fees, and Special (Dedicated) Revenues, some questions arose that will be addressed in this budget update.
Budget Sustainability and the impacts on the 2026 Operating Budget have been presented with continued discussions held from the prior year starting with the Council Retreat January 25,2025. Subsequent discussions were held on April 22, 2025, May 13, 2025, and June 13, 2025, with Study Sessions held on May 13, 2025, and June 24,2025.
The City Manager has discussed the 2026 Preliminary Operating Budget with the City Council on August 19, 2025, and September 30, 2025. The preliminary budget incorporates feedback from those discussions. The budget maintains basic service levels and programs and includes limited enhancements in priority areas. This public hearing provides Council an opportunity to hear testimony from the public.
A Study Session was held on October 14, 2025 with discussion around Business and Occupation Tax increase scenarios as well as proposed reductions.
The 2026 Preliminary Operating Budget includes appropriations to fund:
• General Fund - basic core municipal services such as Administration, Engineering, Finance, Fire, Human Resources, Information Services, Legal, Parks, Planning, Police, and Transportation.
• Debt Service Funds - debt service to support outstanding debt obligations.
• Enterprise Funds - Drinking Water, Wastewater, Storm and Surface Water, and Waste ReSources utility operations.
• Special Funds - appropriations for Inspire Olympia, Lodging Tax, Parking and Business Improvement Area, and Housing/Homeless Response programs.
• Operating transfers between funds, including revenues collected through special revenue and utility funds that will be transferred to the capital budget to support projects.
The 2026 Preliminary Operating Budget appropriates a grand total of $230,433,108 for expenditures of which $122,085,461 is appropriated within the General Fund.
Some changes from the Preliminary Operating Budget are:
• Reduction of Economic Recovery Reserve contribution from $200,000 to $100,000 for Oly Strong
• Increase General Fund contribution of Oly Strong by $100,000
• Rental Registry revenue will target 63% total compliance. Will add 1.5 FTE to better administer the program, freeing up productivity hours of Development Fee Fund staff
• Adding $100,000 for Emergency Management support
• Adding $195,000 for Downtown Guides
• Adding $60,000 for Home Energy Score
• Adding $20,000 for Flower Baskets
As requested at the November 3, 2025, meeting, attached is the additional LTAC funding information.
City Council will hold an additional Public Hearing on November 18, 2025 with a final Budget Balancing update on November 25, 2025. Adoption of both the 2026 Operating Budget and the 2026-2031 Capital Facilities Plan is scheduled for December 9, 2025.
Climate Analysis:
No specific climate impacts are identified as a result of holding the public hearing. However, the 2026 Operating Budget contains funding to continue our Climate Work Plan.
Equity Analysis:
No specific equity impacts are identified as a result of a budget update presentation. However, the 2026 Operating Budget contains funding to continue our internal/external Equity Work Plans.
Neighborhood/Community Interests (if known):
Members of the community may have an interest in this agenda item as it deals with City finance, direct delivery of services and programs, and fiscal governance.
Financial Impact:
The Preliminary 2026 Operating Budget appropriates $230.4 million of which $122 million is General Fund.
Options:
1. Receive an update on the Preliminary 2026 Operating Budget.
2. Do not receive an update on the Preliminary 2026 Operating Budget.
3. Reschedule the budget update to a future date.
Attachments:
2026 Preliminary Operating Budget
2026 LTAC Funding Recommendations with Scores and Ask
2026 LTAC Funding Review Criteria
Presentation