Tumwater’s 2025 budget projected to end in the black

The City of Tumwater is projected to end its 2025 fiscal year with a net budget surplus, as less spending offset revenue shortfalls. 

Finance Director Troy Niemeyer delivered an update to the Tumwater Budget and Finance Committee at a meeting on Feb. 27.

He said while revenues from the general fund are currently about $1.3 million below projections, spending also came in under the adopted budget by less than $6 million, resulting in net gain of around $4.7 million. 

Niemeyer said the 2025-26 biennial budget was projected to use $5.5 million in reserves to balance operations. Since expenditures were lower than expected, the city’s fund balance did not need to be applied. 

Staff estimated about $48.9 million in general fund revenue for 2025, but has so far pulled in roughly $47.6 million. 

In reviewing revenue sources, Niemeyer said both property and sales tax collections came in below budget. Property tax revenue was 5.6% under projections, while sales tax was 6.5% below. 

Other sources exceeded projections. Business and Occupation tax came in about 4.5 percent above budget. Lodging tax, which is collected on hotel stays, increased 27% year-over-year. The increase was due, in part,  to the reopening of hotels.

Utility tax revenue, which Niemeyer said lagged earlier in the budget cycle due to delayed allocations, has been updated and is now stronger than previously reported. Building permit revenue also significantly exceeded expectations. 

Niemeyer also noted interest earnings, which are estimated at nearly $1 million, have not yet been allocated. Once applied, he said it could bring revenue closer to the original projected amount.  

On the expenditure side, the city budgeted $52.3 million, but only spent $46.2 million. Nearly every department was under budget except for the Tumwater Fire Department, which was about $100,000 over budget.

Economic indicators 

At the end of the update, Niemeyer reviewed economic indicators and potential risks that could affect the city’s financial outlook. 

On the positive side, he said gross domestic product, which is the sum of all goods and servies prouced within a nation's borders,  has been growing for three consecutive quarters, and unemployment and inflation have both trended downward recently in the United States.

However, Niemeyer noted economic data in late 2025 was disrupted by the government shutdown and for much of that period, the U.S. Bureau of Labor Statistics was unable to collect data for key indicators, such as the Consumer Price Index and unemployment. 

He also pointed to several ongoing geopolitical and economic risks, such as the conflict in Iran, an increasing national debt and global tariffs.

He added that artificial intelligence may be accounting for as much as 1.1 percent of gross domestic product growth, raising the question about how much growth is occurring outside of AI-related investments.