Friday, October 2, 2026
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To address a projected $6.5 million operating budget shortfall for 2026, the Olympia City Council is backing a scenario in which it relies more on an increase in the Business and Occupation tax and approval of a new public safety sales tax.
At the city council meeting on Tuesday, Sept. 30, City Manager Jay Burney and staff presented four scenarios for balancing the budget, which centered on potential increases to the Business and Occupation tax (B&)) and potential program reductions. The council members narrowed their discussion to Scenario 1 and Scenario 2.
Under Scenario 1, which includes both the public safety sales tax and a modified B&O tax increase, the city would reduce its $6.5 million budget deficit to approximately $1.5 million. The sales tax would cover roughly $3 million of the gap, while the B&O increase would generate about $1.9 million in new revenue.
In Scenario 2, the council would only approve the public safety sales tax and explore reductions in city services and programs. That would leave about a $3.5 million budget gap.
Council member Dani Madrone, who made a motion to proceed with Scenario 1, offered a modified approach to the B&O tax.
She proposed exploring a B&O tax increase that would spread the tax hike across all business categories, not just retail, while lowering the exemption threshold for smaller businesses possibly from $500,000 to $250,000. Her goal would be to raise revenue close to Scenario 1’s target of $1.9 million.
The motion passed with support from Council members Madrone, Clark Gilman, Jim Cooper, Robert Vanderpool and Mayor Dontae Payne. Mayor Pro Tem Yen Huynh and Council member Kelly Green voted no.
In supporting Scenario 1, Gilman said he wanted to avoid staff cuts or reductions in services. He emphasized the importance of maintaining programs in diversity, equity, climate, public safety, housing and social services, calling them “essential services to our city.”
While acknowledging higher business taxes could cause moderate to severe strain, Gilman said “there is the same strain on every household right now.” He said cutting the social safety net would place “severe to extreme pressure strain on poor people who use these services.”
Cooper backed Scenario 1 with a hybrid approach that uses reserves, some cuts and B&O tax adjustments. He said reserves should be used as a regular balancing tool since they are replenished annually.
Payne was torn between the two scenarios, but he ultimately voted for Scenario 1.
“What good is it to avoid taxing our businesses if we are not able to continue to deliver on some other potential services? I don’t think it makes sense to collect a public safety tax from the community, and then turn around and reduce public safety," he said.
Payne is also interested in exploring a hybrid approach, but disagrees with tapping into reserves.
“I’m thinking about long-term sustainability and not doing another short-term solution, like dipping into the reserves like we did last year," he said.
Payne said he would like to see more detailed information before the city council makes a final decision on the budget.
Despite voicing reservations during the discussion, Madrone also supported Scenario 1.
She said the budget represents Olympia’s most important policy commitments to equity, climate and net-zero by 2040, and did not want to see those cut.
“It is hard for me to be thinking about defunding these things when we said that we were in it to win it," Madrone said.
She warned that adopting only the sales tax proposal in Scenario 2 would leave $3.5 million in cuts concentrated outside of public safety, meaning other city services and programs would become vulnerable.
She wanted the staff to find a “sweet spot” that would provide some relief to smaller businesses, maintain funding for multiple city priorities, and address the budget gap without making drastic cuts.
Green pointed to rising costs as her reason for supporting Scenario 2. She expressed strong reservations about increasing both sales and B&O taxes, calling it a compounding of the regressive tax burden.
Green emphasized while costs are rising for everyone, she is concerned about Olympia’s reputation as an expensive place to run a business.
Green is also opposed to using reserves, saying a “hard no on touching reserves at any level” because they should be preserved for true emergencies.
Huynh strongly advocated for Scenario 2, citing challenges facing local businesses, including rising food costs, federal tariffs, reduced foot traffic and changing consumer habits.
She said the proposed B&O tax threshold would not truly help small businesses, as the average restaurant in Olympia brings in far more than $500,000.
Her primary concern was providing relief to struggling local businesses during a challenging economic period.
“There are all these things that are already happening to businesses that are out of our control. B&O tax is in our control. I’m not willing to increase B&O," she said.
Burney also walked the council through potential areas for program and service cuts. He stressed that they are “just a reference point” for discussion. His first filter was to look at programs added in the past five years.
Burney emphasized that police and firefighter staffing levels would not be cut, and reductions in public works and support services would be minimized.
City staff is expected to return for a council study session to provide a fund balancing update on Oct. 14.
16 comments on this item Please log in to comment by clicking here
Southsoundguy
What a stupid decision.
Wednesday, October 1, 2025 Report this
Honestyandrealityguy
Dumocrats. Rather than budgeting they charge incredibly high taxes (which will close a few small business and they spend like drunken sailors. Sad. Common sense please.
Wednesday, October 1, 2025 Report this
jimlazar
I don't think they CAN spread it to many business categories beyond retail. The law limits the municipal B&O tax to 0.2% without a public vote. Olympia is currently at 0.1% for retail, but at the 0.2% rate for professional services, the other main category of business in the City. There are a few manufacturers, and they could be increased.
I operated a one-person consulting firm for many years, and my City taxes were often higher than my State B&O tax, because the State had a small-business credit, but the City did not.
I think they are already at the statutory maximum for B&O tax on services, at 0.2% of gross revenue.
See: RCW 35.21.710 OMC 5.04.060
The current Olympia tax is half that for retail, so they have some flexibility with retail, but I don't think they do for other business categories.
Wednesday, October 1, 2025 Report this
JohnFronono
Which services should they cut that you’d like to complain about later?
Wednesday, October 1, 2025 Report this
Bobwubbena
Could you please put this in simple perspective. First, list all of the "new taxes and fees" you have layered on the local small and larger businesses that have been sun setted, and those that you (and the County) are still collecting from the local businesses and families. Where are those funds now going and how do the new proposals relate. Some of this sounds like "DOUBLE CHARGING and using for other purposes"
Then identify for a typical small, middle size and larger business or tax account that have to pay to the city under your various proposals.
Then ask, maybe the City Council should take a pay cut and be paid less, the City staff paid less, just like the local business owners will be paid less to fund the next new tax. Let's put this in perspective. Santa Claus comes only once per year, and he already came---he sent the money to Washington DC.
How many of the City Council have ever run and survived a City taxed business in the City?
Wednesday, October 1, 2025 Report this
jimLacey
"the budget represents Olympia’s most important policy commitments to equity, climate and net-zero by 2040"
I'm thinking that pretty much sums up why Olympia is always in a budgeting bind. Those may (or may not) be important to residents of Olympia, but making them the "most important" to the council means you are always going to have tradeoffs everywhere else.
Wednesday, October 1, 2025 Report this
Chris_R
The first thing I do when my monthly bills exceed my income is to raise my income........right!?
Wednesday, October 1, 2025 Report this
OlyBlues
What a real "screw you" message to all the struggling families in the city trying to survive while the council pretends they know best, and that is to raise taxes even more instead of living within their means. Saying that climate, DEI, and homeless programs are top priorities while taxpayers struggle to pay bills and put food on the table is beyond tone deaf. The city council has never been this out of touch, but here we are. They should be reducing programs and cutting back to core services like they were so eager to do with the city's court system. And why are they not advertising how they spent the countywide public safety tax revenue they started receiving this year? Because the priority for the police department was to use that additional funding to purchase electric police vehicles! This is what priorities look like in Olympia. At least they are "in it to win it" as one councilmember says.
Wednesday, October 1, 2025 Report this
Kimadney
$500,000 gross retail sales annually would pay $1,000 a year at .2%. If a retail store makes $42,000 a month or less, there is no B&O tax.
City of Olympia has mandated the maximum at .2%. sounds like a vote of the public is needed to raise this to the state's mandated limit is .4%. If you look at Tacoma, they charge .4% for service industries and .153% for retail. There's lots of ways to increase this tax without burdening small business.
Thursday, October 2, 2025 Report this
JW
"She said the budget represents Olympia’s most important policy commitments to equity, climate and net-zero by 2040, and did not want to see those cut."
Good to know that when times are getting tough, the city council considers DEI and climate BS to be core services that they'll willingly inflict more harm on their constituents in order to continue.
I'd say that I feel bad for the residents of Olympia, but they'll been electing the clown show for years and deserve the results.
Thursday, October 2, 2025 Report this
KarenM
Bob Wubbena,
I agree that the Council should look carefully at cuts to programs and projects. I also agree that there are important initiatives that should be kept.
The pay for Council, however, is not part of the budget problem.
Do we want to pay so little for city council positions that no one wants to serve, or that very few can afford to serve?
The current yearly pay for a council member is about the same as a a seasonal parks maintenance person, only they are paid as if they work half time. (They also receive a stipend to help pay for insurance, but that is portioned at half of full costs.)
Thursday, October 2, 2025 Report this
TheVirtualOne
Hey Olympia City Council. I have just the answer to your budget deficit. Last month you kicked off a $19 million remodel of the Olympia Armory building. Put the brakes on that and you’ll have money left over in the bank. That didn’t take a lot of thought now did it! I don’t remodel my house if I don’t have the money, why should you be allowed to do that?
Thursday, October 2, 2025 Report this
HappyOlympian
boooooooo
Friday, October 3, 2025 Report this
JohnFronono
Maybe the city could sell all the whine in these comments to pay for the deficit.
Friday, October 3, 2025 Report this
NickH86
When I was growing up, I was taught that if there was something I wanted but I couldn’t afford it, I can’t have it. And I use that train of thought to this very day. Now if only the governments could learn that.
Sunday, October 5, 2025 Report this
PhyllisBooth
For decades various Olympia City Councils have approved tax exemptions for the developers of luxury rate housing. There are probably lots of other tax exemptions that exist. Like the State of Washington, our representatives do not know how to budget and develop realistic long-term policies to align with those budgets. Both the Olympia City Council and the State of Washington need to quit punishing small businesses with excessive taxes as the small businesses are going cutting jobs, hours of operation and unfortunately going out of business.
Quit the tax freebies as everyone must pay something.
Phyllis Booth Olympia Wa
Sunday, October 5, 2025 Report this