Olympia officials project modest growth, expect rising expenses 

Improved revenues and a spending freeze led to growth in the City of Olympia's fund balance in the second quarter of 2025.

City Manager Jay Burney and Finance Director Mike Githens presented the 2025 budget status at a Finance Committee meeting on Monday, Aug. 18.  

Burney said the fund balance now stands at $4.5 million above the city’s mandatory 10% reserve, an improvement from the $2.8 million fund balance at the start of the year.  

The city implemented a spending freeze across its departments in April, following a $200,000 drop in sales tax revenue.  

“We have seen sales tax start to rebound, and we have not lost any ground,” Burney said.

He noted the spending freeze helped the city build capacity within its fund balance, providing a buffer against future uncertainties.  

Githens also noted property tax revenue remains stable and sales tax collections have shown signs of recovery in the second quarter.  

“That’s a lot of hard work,” said Githens, who credited departments for slowing spending. “We had a reserve of just over $4 million at Q2, up from $2 million at Q1. That’s a step in the right direction.” 

Despite the positive fund balance, both officials cautioned that challenges remain. 

Jail costs have continued to rise and are likely to exceed initial projections, presenting a significant challenge for the city’s general fund.  

With Olympia’s current jail contract having started in late 2024, Githens said the finance department lacks sufficient historical data to accurately forecast future expenses.

He noted the unpredictability of the costs and said staff are working to refine budget estimates for 2026, while continuing to monitor the situation.  

Githens said Basic Life Support (BLS) revenue collections are stabilizing, although significant increases may not materialize until 2026.  

The city manager highlighted that BLS revenue improved from the first to the second quarter, with the city now billing between $300,000 $400,000 per month. That's well above the $200,000 monthly target needed to meet the annual goal of $1.9 million.  

Burney said he anticipates receiving the first federal Ground Emergency Medical Transportation reimbursement this year, which could contribute several million dollars in revenue. Finance staff are tracking the developments for future budget planning.  

The city is also closely watching the Development Fee Fund, established to stabilize revenue for planning and permitting services. Permit revenue has a $1.4 million shortfall, but is expected to recover as several major projects move forward.  

“This is probably the toughest one for us to monitor because it is not on an exact timeline, and when the projects may come in. But it looks like we are going to make up the delta before the end of the year,” Burney said.  

He said Olympia typically recovers about 70% of its development costs through fees, short of its 85% goal, and staff are requesting a new rate study to update charges.  

Another area of concern is the city’s Workers Compensation Fund. After transitioning from self-insurance to coverage under the Washington State Department of Labor and Industries, the city is still responsible for legacy claims that are more costly than anticipated. Githens said the city will raise its internal rate in 2026 to cover higher-than-expected payouts.  

Githens is optimistic about the city’s financial outlook. He said sales tax is now coming in close to budget expectations than earlier in the year.

“We are heading into those months where the consumers are spending more. … It speaks well to our whole economy," he said.

Looking ahead to 2026, Githens projects modest growth in the city’s general fund, with revenues expected to rise by 4%, largely driven by sales tax. Property tax will remain capped at an 1% annual increase plus revenue from new construction.  

Finance staff project sales tax collections will continue to improve next year. However, costs of salaries, benefits, and other operations are expected to keep increasing.