City Council Study Session on General Fund Forecast and Juneteenth Sponsorship - June 9, 2026
City Council Study Session on General Fund Forecast and Juneteenth Sponsorship - June 9, 2026
The Tacoma City Council held a study session on June 9, 2026, receiving a detailed six-year financial forecast for the general fund and considering a sponsorship request for the Juneteenth prayer breakfast. The forecast revealed a widening structural deficit, with revenues growing at approximately 2.9% annually while expenses rise at about 4.8%, driven heavily by wage and benefit costs. The council also approved a sponsorship for the Juneteenth celebration and received a proclamation declaring Mayors for Peace Day.
Discussion Items
- Six-Year General Fund Forecast: Finance Director Andy Cherulo and Assistant Finance Director/Budget Officer Teresa Green presented an updated forecast. The 2027-2028 biennium shows a $40 million structural deficit, projected to grow to $100 million by 2031-2032. Revenues are not keeping pace with expense growth (approximately 2.9% vs. 4.8% annually). Key expense drivers include:
- Wages and benefits: 60% of general fund expenses; 85% of general fund employees are represented by 19 bargaining agreements. Healthcare costs are rising at 10-11% per year, with a projected 70% increase over six years.
- Fuel costs: originally forecast at 5% increase, now 8-20% depending on fuel type, partly due to the conflict in the Middle East.
- Insurance and liability: self-insured workers' comp and third-party liability require larger baseline investments.
- Revenue Challenges: Sales tax is vulnerable to consumer sentiment; property tax is limited to 1% growth plus new construction; business taxes are declining due to reductions in cable/TV/telephone revenues; utility taxes grow with rate increases but are not immune to market factors. The state's millionaires tax will result in a net loss of approximately $2 million in sales tax revenue when exemptions take effect in 2028-2029.
- Deferred Maintenance: The forecast does not include $174 million in deferred fleet, facility, and equipment needs. Addressing these would require additional funding mechanisms such as bonds.
- State Mandates: Councilmember Sidalgay raised concerns about unfunded state mandates, including police training requirements, parking rule changes, and environmental regulations (nutrients, PFAS). City Manager Han Kim noted these mandates increase costs without accompanying state funding.
- Health Care Negotiations: Kim confirmed the city has issued an RFP for health care providers and is in early discussions with labor partners (Local 6, Local 26, PPSMA) to explore plan design changes. The city is self-insured, which offers control but requires bargaining.
- Other Funds: The streets fund is at risk due to the expiration of the streets initiative; Connect Tacoma ballot measure in August may help. Emergency medical services are stable until 2029 when the levy lid lift expires. The permitting fund faces decline due to slower residential and commercial activity. Tacoma Venues & Events has significant deferred capital needs.
Key Outcomes
- Forecast Update: The council acknowledged the revised forecast showing a $40 million structural deficit for the 2027-2028 budget, up from $27 million in February 2026, due to increased healthcare costs ($6 million), insurance, fuel, and reduced revenue from telephone/cable taxes.
- Balanced Budget Commitment: City Manager Kim stated that a balanced budget will be presented in late September/early October 2026, requiring difficult choices but not an austerity budget. He noted initial reduction strategies of $10 million are forthcoming.
- Juneteenth Sponsorship: The council will consider a sponsorship request for the Juneteenth prayer breakfast at the LeMay Museum, an event drawing over 20,000 attendees. Cosponsors include Mayor Ibsen, Deputy Mayor Bushnell, Councilmember Heinz, and Councilmember Palmer.
- Proclamation: The council proclaimed June 9, 2026, as Mayors for Peace Day.
- Executive Sessions: The council convened executive sessions for potential litigation (up to 15 minutes) and labor strategy (up to 60 minutes), then adjourned.
Additional Notes
- Councilmember Sidalgay requested a detailed list of other revenue sources in the “other revenues” category and a complete list of unfunded state mandates for the next meeting.
- Councilmember Heinz highlighted that approximately 66 cents of every general fund dollar goes to police and fire, framing the challenge of cutting expenses.
- Councilmember Walker asked about community outreach; the community survey results will be presented later in June, and the “Balancing Act” tool will be available soon.
- Deputy Mayor Bushnell emphasized the need to address deferred maintenance and explore bond measures to invest in city facilities.
Meeting Transcript
I'd like to call to order the city council study session of June 9th, 2026. Clerk, please call the roll. Deputy Mayor Bushnell. Councilmember Diaz. Councilmember Heinz. Here. Councilmember Palmer. Councilmember Rumba here. Councilmember Sidalgay. Here. Councilmember Scott. Here. Councilmember Walker. Here. Mayor Ibsen. Here. Welcome everyone. Our first agenda item is a forecast for the general fund. I'd like to call on Finance Directee andy Director. Andy Cherulo to begin the presentation. Thank you, Mr. Mayor and Council members. My name's Andy Cherulo. I'm the finance director. With me here is a very familiar face for you, our city manager, Han Kim, and our assistant finance director and budget officer Teresa Green. So we're here to present to you on the six-year financial forecast. This is working. Our agenda, just so you know, we're going to kind of do a quick review of the budget process and the budget calendar, so we can lock in on what you all should be expecting in the next few months in that regard. A brief overview of kind of the current economic conditions that uh factored into kind of what you'll see in our financial outlook, which is what Teresa is gonna walk you through. So here is our budget calendar. You have seen this graphic before. Um one thing to point out on this one is you'll notice it is it starts in January and goes through December, it's the full year, and there is something about budget going on all the time, always this year. Um, you guys, city council are the big blue bar at the top. Um, so again, you guys have an opportunity uh throughout the entire year to provide feedback to the city manager about your budget priorities, your policy changes, anything related to the budget. So please take advantage of that as this year drags on. Do not wait if you have ideas to change policy or uh budget ideas, revenue ideas. Now is the time to be speaking with the city manager on any of those. Um, as far as uh presentations to you all, we were here in February with a plenary preliminary forecast. Um here we are in June where that big blue star is with our update to that. Um, there's a little bit of a gap in there, and then we'll be back in the fall with an updated forecast if we need to update anything from today in the intervening months, and then you'll be getting briefings from our department heads on their budget proposals. Uh, the city manager, as you can see, is busy in a budget year. There's um all kinds of work going on in the city manager's office related to the budget and meeting with departments and going over proposals, uh culminating with uh late in September, early October his presentation to city council of a balanced budget for you all to consider. Um, the last thing on there is the community bar at the bottom. Again, the community has lots of opportunities to give feedback on the budget. We encourage it. We have lots of different uh avenues the community can provide feedback. We'll talk more about some of that a little bit later, but uh we really love getting the feedback from the community on what uh their budget priorities are this slide talks about uh our roadmap to recovery, the city manager's strategic plan to kind of bring us in structural alignment in our budget over a number of years. Uh so again um we're looking right here. This graphic starts in 2026. We've taken actions in this current year to help set up uh alignment better for our 2027-28 budget.
openpublica.com