Thursday, October 1, 2026
A levy lid lift may be needed in the years ahead in order to help the City of Olympia deal with rising costs, constrained revenue growth and a dodgy budget outlook.
During an Olympia Finance Committee meeting on Monday, June 15, Olympia Finance Director Mike Githens said the state of Washington's 1% cap on annual property tax levy growth is no longer keeping pace with inflation and rising operating costs for the city.
He said the gap between revenue growth and expenses has become increasingly difficult to manage.
“When you can only increase one of your primary revenue sources 1% and your costs are increasing greater than that, it is difficult to balance a budget,” Githens said.
Under state law, cities may generally increase their regular property tax levy by no more than 1% per year, although additional revenue from new construction can be added outside the cap.
The limitation originated with Initiative 747, which was approved by voters in 2001. It was later reenacted by the Washington Legislature after the Washington Supreme Court struck down Iinitiative 747 in 2007.
Githens said the 1% cap was designed to provide taxpayers with predictability, while allowing local governments to seek voter approval for additional taxing authority when necessary.
City Manager Jay Burney said the pressure on the budget has intensified in recent years, as costs have risen faster than revenue growth.
“In my 10 years as an assistant city manager helping balance budgets, even when assessed value was going up, we were often losing ground,” Burney said.
He noted wage increases were often around 1% to 2% in prior years, but have consistently ranged from 3% to 4% over the last five years. Burney said the city is expecting wage growth of 4% or more again this year.
Burney said the gap has widened over the past six years as costs have compounded, creating pressure on the city’s budget.
The levy lid lift discussion comes as the city prepares for a tighter fiscal outlook in 2027 and beyond.
According to preliminary projections presented to the Olympia City Council on June 9, staff expects to have about $1 million available above its required 10% reserve after accounting for planned commitments and one-time costs, including the roughly $589,000 in additional expenses tied to the transition from the Lee Creighton Justice Center.
City staff also identified several major cost pressures heading into 2027, including an estimated 21% increase in medical insurance premiums, wage increases tied to inflation, and rising workers compensation costs. The combination of the three could add several million dollars in annual expenses.
Githens said long-term fiscal health requires proactive planning, including anticipating future funding needs, considering the use of available levy capacity, and preparing for potential voter-approved measures before financial pressures reach a boiling point.
He also outlined hypothetical scenarios showing how a future levy lid lift could help address the budget gap.
Githens said generating an additional $3 million annually would require an estimated increase of about 25 cents per $1,000 of assessed value based on current valuation estimates, while raising $4 million would require an estimated increase of about 33 cents per $1,000.
Burney said any future discussions would focus on the size of the funding need rather than a specific tax rate.
“We need $3 million, right? And all of our conversations are around what does that $3 million or $4 million go towards, and that’s the case you are making with the voters," he said.
No levy lid lift is currently proposed before the city council. Githens said the presentation was intended to provide background on the levy system, as the city begins addressing long-term budget and revenue challenges.
4 comments on this item Please log in to comment by clicking here
JnNwmn
The first thing city's do is cut wages, the 2nd is lay-offs, and the 3rd is raise utility bills.
Tuesday, June 16 Report this
susanh
The city could look at their consulting costs and determine how much ROI they receive for those expenses.
Tuesday, June 16 Report this
Patriot
This is what happens when you are anti business anti development, endless regulations, etc. Does Lacey have money problems? The 1% is a farse. Property values have doubled and so have taxes.. They charge based on value and then ad 1%. Olympia should look to their neighbor that supports growth, Lacey has good roads and maintains their city, Olympia has run it into the dirt. I am sure raising property taxes will help rents.
Wednesday, June 17 Report this
Yeti1981
What is often missing from these discussions is an honest conversation about which investments actually create long-term fiscal sustainability.
The article presents a levy lid lift as a response to rising costs, but it largely ignores the role that economic growth, housing production, and private investment play in supporting local government finances. Too often, when budget pressures emerge, the first areas discussed for reductions are the very departments responsible for permitting housing, supporting economic development, and facilitating investment. Builders, developers, and local businesses are then expected to accept slower service, longer timelines, and fewer resources, even though those activities generate the future tax base that funds city services.
The irony is that growth is one of the most effective tools local governments have to address structural budget challenges. Every new home contributes property tax revenue. Every new business generates economic activity and sales tax revenue. Every investment in the community expands the tax base that supports parks, public safety, roads, and other essential services.
Before asking voters to approve higher taxes, the City should demonstrate that it has fully evaluated its spending priorities and whether current investments are producing measurable results. That conversation should include all areas of the budget, not just the departments that facilitate housing and economic growth. If the concern is long-term fiscal sustainability, then policies that make housing more difficult to build, increase development costs, or slow economic activity are moving in the wrong direction.
Families facing rising costs are forced to make difficult choices every day. It is reasonable to expect government to do the same. The goal should not simply be finding new revenue. The goal should be creating a community where growth, housing production, job creation, and private investment strengthen the tax base so that future budgets become more sustainable without continually asking taxpayers to pay more.
Wednesday, June 17 Report this