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.

Uh again, during our 27-28 budget process, we uh our hope and goal is to again set up some some structural changes that will help in 29 and 30 and get us on that kind of path to having better alignment uh between our expenditures and our revenues.

Ummunity input and community engagement.

Um you will see uh on this slide some graphics.

Uh we've again like I say, we'd love to get community feedback on this one.

We will have our balancing act tool up and available pretty soon.

That is the tool that everyone loves to hate because it is so hard to do.

Uh you have limited resources and a lot of needs in the community.

I do think that tool is insightful for folks to realize how difficult your all job is because there are a lot of needs in the community, and again, we have our limited amount of resources to meet all of those.

We always have budget information up on our website, so that again is another place for the community to go if they are seeking out information.

Our media and communications office is really awesome at getting all kinds of information out on social media and other avenues.

So they're constantly putting out information as well related to the budget that the community can plug into to get that.

Our community survey, it has been completed at this point, and uh what the community told us on that will again factor into decisions related uh to the budget.

We also plan during the course of the summer to attend uh community meetings and gatherings when we are able to to again seek feedback from the community.

We always uh go to neighborhood councils and other community kind of meetings to present the budget to them as well and seek feedback.

So there'll be plenty of opportunity for the community to uh get feedback.

And again, we would encourage you to reach out to those that you all know and engage with.

If they want budget information or presentations, let us know, and we're happy to go talk to anybody we need to.

Okay, jumping into our economic conditions.

The first slide here, we're gonna start with the good news because there's gonna be plenty of bad news coming.

Uh, this is your chance to smile in this presentation.

Um, when we look at kind of the good news going on, when we look at the national data, um our unemployment rate at 4.3 percent has been steady around that same number for a while now, which is a good thing.

Stability in the job market is one of the Federal Reserves dual mandates, and that 4.3% unemployment rate has been been there for a while, showing not a large increase or decrease in unemployment.

Uh the next bullet talks about we've had three consecutive months of really strong job growth.

Um the graph in the lower right-hand corner shows job growth from January last year through May of this year.

And if you look at kind of 2025, you see a lot of orange bars below the line, which means in that particular month, the economy actually lost jobs.

So 2025 was uh an up and down kind of year.

There were uh five of the months had negative job growth, which means we lost jobs.

Of the blue bars above the line that grew, some were pretty anemic when you think of the national economy.

13,000 jobs or 40,000 jobs across the entire nation.

Uh pretty anemic growth.

So when we look at the kind of right-hand side of that graph, you can see 2026 seems to be doing a lot better so far at the start.

We did have one really bad February.

Um the analysts uh again are pinning some of those job losses on.

There was a national health care strike, there was some really bad weather, other things that kind of impact job growth.

But the three bars on the farthest right average 180,000 jobs, which is well in excess of what analysts predicted.

Yeah, uh, so that's uh really good news uh for the economy.

Part of what uh 2025 looked at too is there was a lot of uncertainty going on.

As you recall in 2025, there were the on again, off again tariffs occurring, which provided a lot of uncertainty to the business community.

Um, the current administration's approach to immigration was causing a lot of uncertainty and and how they were approaching immigration and what that meant for businesses and their workforce.

Uh, some of that has been settled now, so um, you might have heard the term that that businesses were in a no fire, no hire kind of state for 2025.

It looks like some of that may be breaking if these job growth numbers continue uh the way they look.

If the next bullet on there, you look at gross domestic product, um, 1.6% growth is not a huge number, but it's not negative.

So a growing economy is is a really good thing.

When we look at our state, uh people are moving to Washington State.

The state continues to see people move here and choose this as their place to live, work, and play, which is a good thing.

Uh the more people that uh come here, that's uh more workers in the worker pool for the economy, that's more consumers for businesses doing stuff in the state.

It's more people engaging with community, so population growth is is a good thing in that regard.

Um, Washington State added as a statewide, almost 48,000 housing units.

Um, it's pretty impressive.

It's not keeping up with the demand, but at least that's a healthy positive number as far as uh growing housing.

Uh an interesting little bit of data here.

Wallet Hub recently did a survey of states' economies, and Washington State ranked second in their thing uh in their analysis, which is pretty good.

It was, they looked at a lot of the data that normally you look at personal incomes, median incomes, housing costs.

They look a lot, that was kind of a little bit of skewed toward the innovation economy and tech, but to rank second in the U.S.

is pretty good.

Only Massachusetts was higher.

When you look at the county, again, 34,000 jobs in Pierce County added between 2020 and 2025.

That's a good healthy number of jobs.

We have JBLM, one of the largest military bases right here in Pierce County, and that generates over $9 billion in economic activity.

So that is a healthy thing to have right there.

When we look at our city, our great city here of Tacoma, again, we just got a credit rating upgrade from all three credit rating agencies now rate as double A plus, which is a really good place to be as far as credit ratings go.

There's only one step higher on that's triple A, so we're in a really sweet spot on that one.

Tacoma continues to see housing growth.

And again, adding housing units and our population growth.

So people are choosing Tacoma as a place again to live, work, and play, which is good for our local economy.

And Tacoma, we've never been just a one-mill kind of town.

We have a really diverse economic base.

The city education is huge, whether that's higher education, community college technical schools, it's a really strong sector for us.

The government sector, whether it's federal, state, or local, is really strong.

Strong manufacturing, it really helps the city in their economic stance.

Because again, we have a lot of sectors that can show a lot of strength.

Now comes the bad news.

Again, this has kind of been a theme you guys have been seeing every time it seems there's a piece of positive economic data, there's negative ones to offset it.

But to start with on the national level, uh consumer sediment hit an all-time low uh last month.

So that graph, that really ugly graph in the bottom left-hand corner, um, it's an ugly graph, it's kind of confusing, but it's really an important point there.

That graph, the Michigan survey of consumer sediment, since 1960 through today.

And when you think of all the things that have happened in the last 60 plus years, uh Vietnam War, Cuban missile crisis, OPEC oil embargo, stagflation of the late 70s where both unemployment and inflation were growing, uh the 20% interest rates the Fred the Fed put on the economy to cool inflation in the early 1980s.

Uh we've had uh multiple wars throughout the world in that time.

We've had dot com booms and busts, we've had September 11th, we've had COVID.

All those things happened in the past 60 years, and again, you can kind of see that consumer sediment fell and go, but today is the lowest it's ever been recorded, which is a pretty amazing data point as far as how people are feeling about the economy in the world.

Um, lowest point in 60 years.

Um, so and why do we care how consumers are feeling about things?

Again, a reminder that consumers spending represents 70% of our economic activity.

So our economy rises and falls with how consumers are feeling about their own personal economy and their choices on how they spend what they do.

So it's a it's a critical piece of data and uh a fairly concerning thing that we hit the lowest point ever last month, last 60 plus years.

Inflation, uh again, it seemed we had our peak of inflation post-COVID where it went over 9% and it was steadily declining until the last few months.

It's creeping back up again.

Last month's indicator was at 3.8%.

A new inflation number will come out tomorrow.

Again, analysts are predicting that it will be even higher than this.

Uh, we will see tomorrow when the data comes out.

Not a good, not a good indicator though.

Again, oil, gas, energy related costs continue to rise, which uh put pressure on inflation, which again does not put consumers in a better mood when they see prices rising everywhere they look.

Uh as far as the state goes, again, we are a high cost state of housing, it's very expensive to live in this state.

Um, job growth has slowed in the state when we're looking at non-agricultural jobs.

We rank 35th in the U.S.

That's like a bottom third of the country.

Not a particularly strong rating there.

Our agricultural sector, although it's not one of the largest in the state, it is a pretty strong one.

There's over 300 different crops that Washington state grows and exports.

And our agricultural sector ranked 50th in the US, last, dead last on net farm income.

So a lot of stress on our farmers that are out there being part of that breadbasket that feeds the world.

When we look at the county, again, we've seen numbers related to new construction activity declining.

Office, retail, and warehouse vacancy rates have the vacancy rates have been increasing, which means, again, not particularly good thing when you want offices and warehouses and retail spaces full.

When we look at our city population growth is a double-edged sword, it's great having more people, but as more people come, demand for services grows.

You all know this and you hear it and you'll hear more of it.

Our expenditure still continues to grow at about twice the rate of our revenues.

And our permitting data, we're always uh working with our uh permitting and development services department to check on how their permitting data looks.

It's one of our canaries in the coal mine, as far as how things are looking, and both our residential and commercial permitting data is declining.

So fewer permits and fewer larger permits coming.

So what does all this mean in the big summary?

Again, and it's the same kind of thing we've been saying for a while.

There are a lot of risks out there and still a lot of uncertainty.

When we talk about the conflict in the Middle East driving up energy prices worldwide, that continues to be one of the largest risks out there.

It's leading to a lot of price volatility, not only in the energy markets, but that's filtering through to other sectors of the economy.

As you think about it, every good that you get at your household has been delivered to you either by a plane, a train, a boat, a car, something that uses uh fuel of some sort.

Um, so again, the higher energy prices and and gas and oil prices, the higher, and the longer they remain that high is gonna put pressure on inflation.

The graph on the lower right hand uh left-hand corner of this chart shows inflation.

It starts in October of 2020.

You kind of see that big mountain peak that that's that post-COVID inflation where it peaked at over 9%.

That kind of steady decline until the very far right-hand side of that chart, you see that creeping up.

The nice thing about this chart is it kind of breaks down inflation into its kind of component sectors, so the services is that light blue bar on the bottom.

That includes housing.

Uh, see goods is a light gray bar, food is the blue bar, and energy is the gray one.

And you can see on that last little bar that energy is uh creeping way up and driving some of that inflationary pressures upward.

When we look at job growth, again, we've had strong numbers, which is good, but uh the Federal Reserve uh people are analysts are predicting since the job growth remains fairly strong in the country, they're gonna turn their attention to inflation.

And the way the Fed controls inflation is by raising interest rates.

They cool the economy.

And when we talk about higher interest rates, that impacts mortgage rates, car loans, credit cards, business investment, it impacts the federal debt as far as the interest they have to pay on the debt that's out there.

Um, so if if interest if inflation keeps rising and the Federal Reserve has to raise interest rates, it will have even further dampering on the housing market and the commercial real estate development market.

Um it certainly will dampen uh consumers and their appetites to continue to spend.

Um, so as far as the risks and uncertainty out there, um, a lot of it's related right now, the current event in the Middle East, but what is inflation going to do and what is the Federal Reserve going to do to help uh control that inflation?

So, that is the big economic summary that that I have for you all.

I'm gonna turn the control over to Teresa, and she's gonna walk you through how all that factors into our financial outlook.

Thank you, Andy.

Uh mayor, deputy mayor, and council members, Teresa Green, Assistant Finance Director, and Budget Officers, Andy mentioned at the start.

But I want to start out by not keeping you in suspense anymore and start out with what is the general funds financial outlook.

So the forecasted uh revenues and expenses are shown here, with revenues along the bottom in that dark blue, and the orange stripes above showing the expenditures that are exceeding those projected revenues into the next six years.

So the 2728 budget is currently around 40 million dollars out of balance, and future growth puts us at around 100 million dollars out of balance by 2130 and uh sorry, 2031 32.

Those percentages along the dollar amounts are the portion of the general funds expenses that would need to be reduced, or how much revenues would need to increase to close that gap.

So you can see that that of course continues to grow as expenses are growing faster than revenues.

And then for the average growth rate, you've heard this already mentioned, you'll hear it mentioned a couple more times is that revenues are just not keeping pace with uh how fast expenses are growing.

It is close to a two for one kind of uh pattern that we're seeing into the future.

So now we want to talk a little bit about uh a number that you saw in February when we were here and presented a forecast of around $27 million deficit.

So what's changed?

So hopefully, no surprise that as a few months have passed, we've gotten some new information from you know insurance brokers, healthcare brokers, um, what some of the impacts of those things that Andy mentioned are having on our budget.

We have seen around a six million dollar increase just in the general fund in our health care costs.

Um, that is around uh an 11 to 10 percent increase per year, as our insurance broker provided us information around what those costs for claims are going to be looking like into the next couple of years.

Our original forecast uh had a number closer to five or six percent, so uh definitely uh higher amount of uh increase there.

Uh insurance and liability costs.

So for workers' comp and third party liability, we are self-insured uh as we were evaluating what the claims experience has been there.

Um we realized we needed to make some bigger investments there.

Um, if some of you remember at modification for the 25-26 budget, we had to make some one-time investments here as well.

We are trying to now put some of those in the baseline, recognizing that we're seeing some trends in insurance costs.

Uh for internal services, uh, they are subject to the same increases in costs around health care and insurance.

Um, those internal services are things like HR and IT and legal that are provided to uh departments of the city.

Um, so their costs went up when we programmed in those same increases.

Uh fuel costs specifically, we are seeing a large increase.

We are not carrying forward though into the 27-28 budget the uh amount of increase that we're seeing right now because we think that some of that will come down hopefully as the war in the Middle East um comes to some kind of resolution.

Um, but we are looking at um, so our original forecast had about a five percent increase in fuel costs.

We're now looking at eight to twenty percent, uh, depending on the type of fuel.

So definitely a higher increase than we had originally programmed.

And then the other item that changed from February is we did uh some deeper look, uh, especially with a few more months of performance around what our general fund revenues are doing and took down our tax uh taxes in our forecast, primarily related to telephones and cable TV.

We have just seen those decreasing at a very rapid rate.

So of that 40 million dollars, we want to go into a little bit more detail of what's in the revenues and expenditure assumptions.

So this graph splits out the four large uh revenues that we have in sales tax, property tax, business tax, and utility tax.

And then you see other revenues along the bottom that have a very large spike.

Those do include one times, really heavily related to ARPA.

So we wanted to show you one, what the collections in the history look like as well as going forward.

But when we take out those one times and really look at structural revenues, this is more of the picture of what revenues history has been.

Couple of things to note here are the impact of retail sales tax exemptions that will go into effect in 2027, will actually bring some additional revenue to the general fund.

We've got around 1.7 million dollars in increased sales taxes that we are projecting to collect related to those retail services that will now be taxable.

However, in 2029, those exemptions go back into place as well as new exemptions go into place for some personal care products that are part of the millionaires tax bill that was passed.

So you do see in sales tax in 2029 a slight dip down.

That is the recognition of the impact of that bill, which then lowers the base going into the future years.

Another interesting thing about this is we are seeing utility tax, which is affected by whatever the utility rate increases are.

We are seeing that to where it is going to be outpacing business taxes, which hasn't happened in the past.

But business taxes are just not growing at that same rate that we're seeing utility taxes grow with projected rate increases and their increasing volume.

So I want to provide a little bit more context around those big four of what we take into account as we're looking at sort of the risks and the trends for the big four pieces of revenue that we have.

So of course, sales tax.

I did mention we've got that net impact of both the increase and then a decrease in the sales tax.

It is very vulnerable to consumer sentiment.

So as that is going down, people will you know or may spend less, which they'll allow us to collect less in sales tax.

Property tax, very steady and reliable revenue, but as you all know very well, it is limited at 1% plus new construction each year in growth, and we don't have any expense that is growing at only 1% per year.

Business taxes, as I mentioned, we're really seeing significant decrease in cable, TV, and telephone, which should not be a surprise as people are moving away from those services.

So the taxes for those services are decreasing, and just overall economic trends around how businesses are operating are affecting what we think that growth will look like.

And then utility taxes, as I mentioned, they grow as rates and of kind of volume increases, but they are not immune to things happening in the market around other types of prices or potentially weather trends that are impacting their ability to generate, generate power that they can sell.

So let's look at a little more detail at the expenses.

So we've got on this graph a number of lines down towards the bottom.

I'll touch a little bit on some of those.

Transfers to other funds, those include things where the general fund provides supports to streets, the theaters, police and fire pension, and other programs that are held in funds outside of the general fund.

The indirect costs, those are those assessments or allocations we receive from other city services like IT, HR and legal.

Operating and debt are the expenses that just keep departments running, things like cell phones, office supplies, computers, along with around seven million dollars a year in general fund debt that we pay.

External contracts, and that black line there is just that.

Those are services that the city contracts with externally, with a large portion of this spend being related to the community organization competitive funding that is issued by our neighborhood and community services department.

So let's not ignore that top line and the how fast it is growing, or the fact that it is 60% of the general funds expenses, and that is our wages and benefits for around a thousand employees in the general fund.

About 800 of those are in the police and fire departments.

I have some more detail in a future slide.

So I want to go over some of the risks, assumptions, and trends for expenses, and then we'll dive into a little bit more around wages and benefits specifically.

We are seeing around a 28% increase in wages in the past four years.

And as a reminder, we are about 70% of our employees are represented by 31 different bargaining agreements.

In the general fund, that's around 85% are represented by 19 bargaining agreements.

So it is a lot of work and a lot of people that need to be discussed or be part of the discussion when we're talking about any changes or impacts in wages, as well as benefits.

So the city right now is seeing around a 40% 41% increase historically, and we are expecting to see that number be over 70% going into the next six years.

Our health care is the largest portion of our benefits, and it is a flat dollar amount that employees contribute into that benefit.

So all cost increases are paid and borne by the city.

The operating costs, of course, as Andy mentioned, the kind of things that are affecting the price of everything that we're paying for, we're just seeing that increase for the cost of goods and services, inflation, and while we will have some new revenues for that retail sales tax exemption, we will also be paying more in some sales tax for certain departments that have either advertising or janitorial type services, and then internal services, just as a reminder, they are subject to increases in all of these same areas, and those increases are just spread to the other funds of the city where they are providing that service.

So for a more detailed look at wages and benefits, we wanted to give you a little bit of the trend of what we've been seeing.

So this is a sample employee that you can see in the darker blue bar is their wages from 21 through projected out through 2032.

Those percentages along the edge there are how much it's changed in the period that we're looking at from 2021 and then projected out.

So we've seen about an 80th overall 83 percent in wages.

This does not include people who get step increases through the range of the salary table.

This is just in the kind of base wage.

That second blue bar there, the lighter one, that's health care.

That has grown total of 118% since 2021.

And as we will mention more in this presentation, it is definitely growing at a faster rate than we've seen historically.

And then the increase in the other benefits is primarily increases around how much we're funding the PFML program.

So now we wanted to do a little bit of demonstration of where's the money coming from?

Where's the money going overall in the general fund?

So you saw that first graph that shows the gap.

This is another way of looking at it.

That right now we're forecasting around a 707 million dollar budget in the general fund for 27-28.

And along the left side, there you can see the revenues with the size of the line being showing the size of that revenues collection.

So, of course, our four big property taxes, licenses and permits, primarily business licenses are what is in there, and then other revenues, intergovernmental revenues, round out our overall revenue collection.

And then you can see on the right hand side what our expenses are, largest portion being wages and benefits, and those other costs that I described.

The orange operating gap there, again, that 40 million dollar number, we can't just lob that off.

That has to be solved in the proposed budget, either through increased revenues or decreased expenses.

Because we're all full of good news.

We did want to provide some additional context around what this general fund structural gap does not include.

So there is significant deferred fleet investments, facility investments and upgrades, as well as deferred and pending equipment replacements, especially in our public safety departments that are right now not funded.

And we will need to address some funding for those going into the future.

So to terrify you even a little bit more, wanted to provide a graph.

So I don't just provide this to provide shock value.

I want to be able to say if we were investing of all those hundreds of millions of dollars in deferred, if we did a little each year, right?

Uh you know, looked at a 10-year way of getting some funding into fleet, a 20-year model of trying to get some ongoing funding into facilities.

This is what that gap would look like.

We are not proposing that we address 174 million dollars in the proposed budget.

However, actions through the roadmap to recovery will create flexibility that will allow us to start to meaningful meaningfully address some of this deferred into future biennial.

So we don't want to just focus completely on the general fund.

We want to let you know about the outlook of some other funds, major funds of the city.

So let's start with streets.

Shouldn't come as a surprise that our streets fund is what we would consider at risk, and that means that we are really seeing a reduction or the need for a reduction there.

Of course, is the expiration of the streets initiative in 2025.

That's what puts this fund at risk.

The public works staff is looking at some proposals around reductions that will help make up some of that loss in revenue.

However, we also are looking at connect to coma on the ballot in August, and hopefully we'll bring that fund into a much better alignment than it is right now.

For emergency medical services, it is both stable and declining.

It is currently stable as we do have a levy lid lift in place that the voters passed in 2023, and that puts us in a good spot through 2029.

However, in 2029, the levy lid lift will go away unless we go back to the voters to lift that again, and we'll revert to the 1% growth per year.

In addition, we are seeing some changes to insurance billing and Medicaid supplemental payments with the changes, especially related to the one big beautiful bill act and Medicaid availability as well as the Affordable Care Act marketplace, and that is of course the second largest revenue in emergency medical services.

So we do see kind of more into the future, there could be some decline there that will need to be addressed.

In our sales tax special revenue funds, we think this is pretty stable while there's a number of factors that could drive sales tax in one way or the other.

We do have a number I wanted to highlight that the city does have five one-tenth of one percent, kind of dedicated funding sources with the mental health and substance use disorder, the transportation benefit district, which was just reauthorized, Tacoma Creates, which was also just reauthorized, and affordable housing, and then our newest one-tenth of a percent with the criminal justice and public safety sales tax.

So we're right now looking at the outlook on those being stable, but it does mean a lot of those funds are committed to programs, so we do not see a huge increase coming where we will be able to invest differently unless we make some different decisions on the programs already funded there.

For real estate excise tax or REIT right now, seeing a pretty stable real estate market, potentially some new growth, yet a lot of those collections, just like in sales tax, they are already committed to projects throughout the city.

So we were looking at this as being kind of stable.

The last legislature, there was a new house bill that expanded the use of REIT, didn't expand it in a way of millions of dollars, but does have some new maintenance that can be covered by REIT that was not eligible in the past.

So that is a factor as we look towards planning for 27 28 around using those dollars potentially in a different way.

So for our enterprise fund, hopefully not a surprise based on what you've heard earlier in this presentation that for our permitting fund, we're gonna see a decline there.

We are seeing a slowdown in both residential and commercial permitting activity, and just overall broader economic trends as interest rates and inflation are going to impact the decisions that developers are making in both residential and commercial spaces.

For environmental services, those three funds are pretty stable right now.

They've got a new revenue source that they'll be collecting related to system development.

But there are some new risks on the horizon with new expanding permits and new regulations related to emergency contaminants of concerns such as PFAS for the city's parking fund, looking pretty stable.

It is continuing to see recovery after COVID, though we are seeing some delays in the collection of that revenue, which means while that revenue is booked, the cash isn't coming in the door as quickly as we'd like to see.

There is also some significant deferred maintenance that is in our parking system as well as the systems related to our parking that will need to be upgraded.

So they'll be looking at potentially some of the revenue that they have going to help fund some of those, or we as a city will have to make some decisions around how we also address that deferred maintenance and the upgrades that will be needed.

Along the story of deferred maintenance, we'll touch on our Tacoma venues and events or TVE funds for the Tacoma Dome Convention Center and Cheney Stadium.

They have significant, and of course, and the theaters, significant spending that is going to be needed around capital needs, just deferred maintenance and deferred expansions that we will need to address in 27, 28 and into the future.

So that is why this one is marked at risk, because those the revenue that is primarily generated there is related to paying for the events that they hold.

So they are going to have to do some budget proposals related to how they want to create some capital funding.

We are, of course, still seeing regional competition around events for the Tacoma Dome, which can impact their revenues as well.

So want to be able to touch a little bit on, right?

This is not a new gap.

Many of you have seen a presentation very similar to this before.

In some cases, you've seen it for potentially a few decades.

So we want to address how have we tried to how we tried to deal with this, how past councils tried to address this issue.

So we've done kind of a 10-year look back of sort of what have we done of how we tried to solve the general fund gap.

So we have some one-time and some ongoing things that we've tried to do.

You okay there?

So we've got some non-recurring revenues, specifically things like ARPA.

We absolutely use those to help fill that gap that we were experiencing among general fund revenues, but those are one time.

As excess fund balance builds up, we are we have used that in the past to help fill that gap to maintain a balanced budget.

We are currently in a hiring freeze, so those again are one time holding those vacancies in order to kind of save those dollars.

We've also deferred wage increases or frozen wage increases.

And then, and then of course, leading to our deferred capital fleet and facilities maintenance, we have deferred or eliminated a lot of those kind of investments.

Ongoing, we've redirected some revenues, like franchise fees, cable franchise fees are now in the general fund, just as an example of where those things used to live elsewhere.

But in evaluating those revenues, we were able to move them into the general fund.

We've also increased fees and charges, right?

We have made uh changes to business licenses and business taxes in the last few budget cycles.

You'll see some detail on the next slide about that.

We have also reduced positions or redirected them to funds outside of the general fund where that funding source is appropriate, or have shifted costs or service deliveries to external contracts, which we did in one of the last budget cycles, moving senior center services to Parks Tacoma.

So specifically around revenue, we have shown you this slide before, but want to be able to reiterate what we've done around trying to create new ongoing revenues.

We've done a lot, however, the majority of that is in that lower section, which is non-general fund.

Those are very important programs, but they are not dollars that have necessarily benefited the general fund except where we've been able to redirect some costs from the general fund to these new dedicated revenues.

But along the top, we have uh increased uh license fees, we have added um you know transport fees in the general fund that are related to providing EMS services through the service contracts with our partners, we've increased business license fees, those all have added a little over 18 million dollars a year to the general fund.

Still, however, not keeping pace with those that expense growth, and then almost 44 million dollars a year in new revenues outside of the general fund with those one-tenth of a percent sales taxes that we talked about, the levy lid lift that we talked about, or um just uh additional uh taxes like the new event tax that is being collected by TVE.

So it's not just revenues that we've touched, we've also done some uh expense reductions and additions, but a lot of the one-time things that we have done have been to address uh some really critical areas of the city, like our deferred um fire fleet.

In the last 10 years, there has been nine million dollars invested in fire engines and ladders that has all been given one time, so that doesn't necessarily help us in that ongoing need.

We have also, right?

We've got our new police hiring incentive that has helped the police department get fully staffed.

We will see those costs carry forward into 27-28 as a part of that initiative.

We have put uh one to four million dollars every year into police and fire overtime.

So that has been kind of a every biennium.

We're dealing with that issue with a one-time solution.

And we have funded sheltering services in ongoing or sorry, in one-time ways, somewhat uh, in addition to all of the ongoing funding that we provide for those services, which is on the other side of this slide around sheltering and encampment services.

We've added new programs, new contracts there.

Um we have in the past had fire rovers.

You all will I'm sure remember last budget process where those were then reduced from the budget, so that is a reduction that has been taken, but that just has resulted in additional overtime.

We've also added a toll alternative response programs for heel, hope, and CSOs, and for those listening who don't know what heel, hope, and CSOs are, the definitions are there.

Um, however, that is around six million dollars a year for the current funding for those programs.

So, want to close out and sort of bring the presentation back to where we're at in the process.

Again, that blue stars where we're at today.

We're only halfway through the budget marathon.

Want to remind you that take this opportunity to ask lots of questions today.

We're here and ready to answer those, but making sure that you are throughout the year providing the direction, listening to the community, and knowing that the departments are doing a lot of work to be able to bring you a balanced budget in the first week of October.

We are ready here to answer any questions you may have.

Council, thank you for your time today.

Thank you.

Any questions, Council Member Sidalgate?

Uh thank you, Mayor.

I tried to jump in first because I have uh something I need to leave for in a few minutes.

So I wanted to try to get that, so I appreciate that opportunity.

First, thank you very much for this presentation.

Um it was um really robust, actually.

Uh excuse me.

Sorry.

Um I actually appreciate the um uh the history lesson in the last few slides over there, kind of explaining, you know, some of the tactics we've taken where we've gotten.

So thank you for adding that.

That's really um uh important.

I had one uh very specific question you had mentioned in the outlook uh streets initiative.

I wanted to know is that reflected in the graphs in some way, or was it not small?

Like I'm for example, the graph on 15 with um general fund revenues going up and down.

I know there's a general fund impact on streets initiative.

Is that not is that not reflected because it's not one of the sources, it just kind of offsets.

Yeah, good question, council member.

The streets initiative revenues are not collected in the general fund, those are collected in a special revenue fund.

Um, and I don't remember which slide 15 is if someone can pull that up so that um, that's slide 15 is the forecasted revenues without the one-time ARPA dollars.

That's fine.

That makes sense.

So those revenues do not include um streets at all.

So then that would really be a potential risk on that next slide on expenses because um if something were not passed, uh it could it would have pressure on the general fund, uh, but we wouldn't know exactly what that would be in the future.

That's what you mean by the risk that was there.

Okay.

I kind of get that now.

Slide 23 does talk about specifically um so when we talk about that street maintenance and capital fund, that's where those revenues are collected, and that's why that particular revenue stream is uh considered at risk or that particular fund because they won't have those revenues coming in.

The risk could be on the general fund uh depending on how we choose to fund that, or it could be.

The risk is either on the general fund to to fund things that we normally wouldn't have gotten to, or our roads go bad, kind of, right?

Like, or we defer the maintenance or service level.

Because net net, like if I were to summarize it, you know, our projections are at least on the general fund in the foreseeable future, that um our revenues are increasing at roughly 2.9% on an annualized basis, and we believe that our costs are gonna be primarily uh are gonna be in the 4.8% increase.

It does look like wages and benefits a sharper slope.

Is how much higher than 4.8 Dino?

This is on slide 17.

And does that uh I'm I'm really looking at the the portion to the right of 2027.

Um, and then the question is how much higher than 4.8 would that be?

And does that include the increased benefits cost um that we're seeing?

It does include those increases that we um shared around health care and wages.

The reason that is growing higher is those particular uh pieces are just growing faster than um those external costs or the cost for equipment or materials, and we're able to a little bit better control and just say, Oh, we're not gonna buy that, we're gonna defer that.

Really, about the only way we're saving in wages and benefits is position reductions or vacancies.

Um, so we're uh just assuming into the future, here's all those costs, and we can control those operating costs and those kind of lower lines a little bit better by um doing those deferrals or we'll not we'll cancel that project.

Um we're not gonna lay off staff just in order to bring that line down, yeah.

Um we are projecting right now.

Here's business as usual with the positions that we have filled.

Uh I just wanted to know how much, like, is that a six percent increase?

I'd have to look at that point.

Yeah, just give that to me offline.

I just wanted to kind of I couldn't tell like just looking at it.

Um then going back to slide 15, it, you know, others used other revenues used to be really small.

We seem to have some amount.

I, you know, it's not terribly as not it's not as minuscule as it used to be offline.

If you could just give me a list of what some of the the leading ones are there, because I'd kind of want to see what's still out there.

Obviously, it looks like it's also gonna grow at lower than uh um inflation rate.

So it's not meaningful, but it's it's large enough that it's creeped up that I'd love to know what that is.

Um the rest, you know, I'm gonna take some time to really digest some of this, especially as it comes to um these next few weeks.

Uh I had a few kind of um uh kind of comments out there.

Um, you know, a lot of this is due to factors beyond our control, as you as you mentioned.

In my personal opinion, I think these are, especially since our higher uh cost increase.

I mean, you put a number on at least one 1.5 million on just fuel costs is due to external factors beyond our control, primarily, you know, the second, the first, second, and third order effects of our federal policy.

Um I don't think it is a surprise.

Well, it is a surprise by the sheer number for me on health care costs, but it it does make sense to me.

Um, I'd share this with other people.

I was uh in an industry where we valued health plans back in the early 2000s, where we were seeing things like this where um between demographic profile changes and cost increases, we were getting double-digit health care cost increase.

And in fact, it was that experience in the late 90s, early 2000s that led many several conservative lawmakers to sign on to the Affordable Care Act in 2010.

And from 2010 until relatively recently, I'm not gonna say it was all uh uh, you know, wonderful, but we had mitigation in health care costs, and quite frankly, we're a year out of this federal administration trying to take away those uh protections, and of course we're gonna see these massive increases in in health care, and they have a real world effect on our ability to do really good things uh on a local level.

Um my next question, and I think you kind of touched on it uh in risk, um, because we we had a small discussion on it, um, unfunded state mandates.

Would you be able to help?

You know, I I know we don't have numbers around it, but give examples of things that are coming down the pipeline that we believe are gonna cost us money that the state's making us do with absolutely no uh support.

Right?

Thank you, Councilmember Sadalgay.

Uh yeah, so when we think about some of the mandates coming from the state, uh we're gonna work on getting a more complete list for you all to kind of talk about some of these things that come, but we can talk about, like I've talked to Chief Jackson and police training, and again the requirements to train officers more.

Again, not that it's a bad thing to train officers, but when they're in training, they're not doing their day job, which means we backfill on that front.

So the more hours required to be in training, the more we fill in behind the.

So in that case, the cost is really a la uh a loss of efficiency in in the core job because we have to do this additional thing.

We don't have additional resources to do it, right?

We don't do it in the you think about it like in the permitting world.

Uh, again, there's these things that come down from the state on how they I was talking to Peter Hoffman this morning about like changing our parking rules.

So there's a lot of work to say the state's mandating a different approach to parking in the city, which is gonna require a lot of work on that part.

The same thing with like special needs housing.

There's gonna be a lot of changing in there.

When we think about the ones you've heard about, uh, like environmental services, nutrients, and the approach to nutrients in the state saying, hey, you have to do something different with how you treat those things.

PFOS is another thing out there that would hit both environmental services and our water utility, as far as if the state mandate comes to say, hey, you need to do something to control these dollars tend not to come with those things.

It's uh you get to figure out how you pay for those things.

So we'll work on a more complete list, but you know, the the list seems to be growing lately of things the state is saying you need to change how you do your business, and you need to figure out how you're gonna pay for that.

And that's um, and the reason I'm I'm bringing this up as um uh for the rest of my colleagues is as the representative for the state legislative priorities um committee on on association Washington cities.

This this should be something, you know, that that we care about.

It's something that um I think our neighboring jurisdictions, and thank you, Councilmember Heinz for being the Ford Member One because you actually explained this to me, which are these um uh unfunded state uh mandates and their their real world impact on our ability to provide services for our residents when we are doing these you know very good things to change rules and add things, we are taking away our ability to do the regular things that people expect us to do.

It's not obvious, it just happens, and it's something that we need to be able to communicate to our state uh colleagues that they have real world impact for the same people.

We represent the same people here, the same constituents.

Um, and so I would appreciate a fuller list prior to our our next meeting.

Mayor, I just wanted to just add on to Director Trello's um that was probably the best example when it comes to training standards.

You will not find staff or command staff, Chief Jackson, speak to the fact that we don't want to have us a training.

What I want to share and add on to as well is um what is on your legislative priority last year, and I expect you'll be discussing in earnest even this next session is uh wash dot um uh turn back properties for right-of-way uh maintenance.

The city has um entered into areas whereupon the state has looked towards local municipalities to provide maintenance standards um when it comes to the myriad of of right-of-way that we are we can't let the conditions get to a point.

So that should be a top priority for us as well.

I would just add that.

I know that that's gonna be on AWC's priority stack as well.

So that that's probably from a general fund standpoint as well as for uh our street operation standpoint, um, whatever happens with uh the will of the voters in terms of what happens with Kinecoma, um, that is something that is here now and and into the future for all of us.

So, absolutely that's a that's a great example as as well.

And and one of the points that that came up in our first meeting um was this idea that as the state is getting uh less regressive in tax policy on a state level, the only tools we have on a local level, right?

Throughout the state, the only tools local municipalities have are regressive tools, generally sales tax increases.

And the frustration that the constituents, again, the same constituents feel, is that they're being nickel and dimed because as you look at our history, we have to nickel and dime.

We have no other tools.

Um, and that is and this is a way to just explain to uh residents that uh, you know, we feel their pain.

Um last set of questions.

Um I'm gonna throw a new one at you.

Um a lot of people think we waste money, we as a as governments because we because we're a government, right?

Um I like after have, you know, I definitely believe that before I was a council member and started looking at some of the numbers and I explain it.

You know, wasting money explain uh implies that there's money to waste.

The city of Tacoma does not have money to waste.

But related to that concept is the idea of borrowing our way out.

Unlike the federal government, can you just uh help uh uh uh confirm we don't have the ability to just borrow money with no strings attached?

There are some real strings attached in borrowing and bonding, correct?

There are council member.

Yeah, we we have to have a balanced budget.

The federal government doesn't, uh, federal government does print their own money.

You should repeat that.

Yeah, yeah.

Well, it's true.

It is true.

We are required to have a balanced budget, which is a good thing.

Uh, federal government does not.

They can print their own money, they can borrow.

Again, if we wanted to borrow money, we have the resulting debt service that we would have to find a revenue stream to support to pay, you know, that bill.

It's like it's easy to put money on your credit card, it's very difficult to find the money in your monthly paycheck to pay more than that monthly minimum.

But again, we we would have to find sources of revenue for all those things.

Yeah, and so that isn't just a tool that we can you know use, you know, we don't have the ability to use that tool, and when we do, we have to be very responsible in how we use that tool.

So thank you.

And so the very last set of questions I'm gonna say, because I want to try to be a little more positive, is I know there's quite a bunch of things.

Uh I'd love a more ubiquitous and and um detailed uh list, but what are some of the things that that that you know the individuals that are working for us doing to help us control costs in this because that that is happening, right?

There's probably a myriad of ways that people are going about trying to save us money, trying to find a better uh solution.

Do you have any kind of things that top hit you and top of mind?

Well, I can jump in here real quick.

Yeah, so again, staff here at the city are awesome at their jobs, their office is awesome at serving the community, and they're also awesome at again thinking about better and more efficient ways to do things.

I think like our IT department, you know, we we had this kind of wild west where people were buying software all over and agreeing to different terms and conditions, and so they wrangle that all together and get us a better deal.

So they're always thinking about things like that.

Like, why are we paying different licensing fees to use Adobe?

Why don't we get one citywide license and get a better deal and do it?

So we do that.

Uh, we've talked about again our fire department has a need to replace their equipment, and again, they find sometimes deals like, hey, here's uh a great deal on a truck, and if we can squeeze some money, let's get a better price on that truck.

So it's happening all the time, but we can get a better list of some of those things that we can document for you all.

Uh I just would want to add, uh, especially because of the question that you had around the um how much wages and benefits are increasing compared to those other uh lines that were on that graph around expenses.

Um we do have uh an RFP that just closed, and we're gonna be making a recommendation around who our health care you know um is provided through.

So we're even doing some of those larger things that are really citywide impact um related to wages and benefits.

Of course, um the our labor negotiations team or labor relations team, you know, doing the bargaining on all those 31 contracts, a lot of work is being done there to do our best to stay competitive.

But um, you know, so I think that we can get you a lot of things that the city is doing, but I wanted to make sure that those were mentioned because those are the kind of wage and benefit sort of things that we're doing to try and control those costs.

Well, where we can.

Thank you.

Um, and you know, the next time we have this uh presentation, if we had a few more lists of just talking about you know what we're what we're doing on our part to the best of our ability, knowing that it's not gonna solve that entire structural and beyond issue, is still important because we should celebrate what what our employees are doing, and and you all know that.

So uh I appreciate that extra time, uh Mayor.

Thank you.

Thank you for the detailed questions.

Uh, Counselor Mines.

Yeah, I'm also getting out of here myself here in just a moment.

Uh go to the ribbon cutting for a Viva Crossing at TCC here in a minute.

So over 150 units of affordable housing in the West End of the City of Tacoma.

So whoo.

Um, so I'm sharing a positive.

I just want to say a couple things real fast.

I appreciate the the history lesson here to understand kind of how we landed in this spot.

Um I it's I think what has been lost, and sometimes in the conversation when you bring up the structural deficit, is I think View Hall staff has been very creative in trying to keep the plane in the air for as long as possible.

Each year we come into the situation where revenues are not matching expenses, and how do we balance that?

And you all have done kind of uh Bill Yeoman's work and kind of making it fit together.

Um so I appreciate all that.

Um I think the graph showing where the funds have come through from the last few years, I think it's very indicative of why we landed in this situation is you know, much to the benevolence of the federal government and the American Rescue Plan, it did give us a lot of income and one-time dollars that we allocated to highest and best needs in the community.

The challenge with that is a lot of those needs were not things that were gonna be solved in the period of time of the money was gonna be here.

Um, and so we are kind of living through the the after effects of that.

And not only are we doing that, but the state of Washington is living through that, and we watched that play out writ large here this last year at the legislative session, and as Counselor Stallgate brought up as the board member for the Associated Washington Cities, I mean, every city in the state of Washington is facing a similar challenge.

We're not unique there, but I do think that graph is really important to show that um we had this rule this influx of dollars that really helped us meet some needs, and now the conversation is are we still able to meet those needs in the ways we were with those dollars now dollars now being absent?

I also just really think it's a good to show all the ways, all the levers we've pulled over the last few years to try to increase revenues.

Um I think it's good for us to be thinking as a body about how many more levers are there left to pull on.

Um, are we more and more dependent upon our partners, the state and the federal government to help us?

Well, we can't there's not many levers for us to pull here, such as we're so limited.

Uh I think most Council Solid got most of my questions, and he asked a lot of questions, and he got most of mine.

I would just give my one, I do really like this uh the diet, whoever came up with the uh Councilman Roman and I are chatting, whoever came up with the outlook, the special revenue funds with a little graphic and the enterprise funds.

I think that's really good.

Um there you go.

I think that's just a really great way to explain it.

Very clear, easy to understand.

Um, maybe think about how we can expand some of some of the other funding sources we have here.

Um I think it'd be really good.

Uh my last comment, and then I we'll get out of here.

Um, and we'll maybe question first.

What percentage of our general fund budget goes to pay for police and fire?

Off the top of my head, it's it's roughly 60 to 70 percent.

All in I use two-thirds as an example.

So I just to frame the conversation as we start talking about addressing the structural deficit in the general fund, and as Councilman Stalgay said, people are saying, I heard people often say, like, well, hey, look at just reducing your costs.

I try to remind every constituent I talk to, um, every dollar we reduce out of the general fund, 66 cents of that is coming from police and fire.

So, um, when we start talking about cutting, and then the next thing is like don't cut this, don't cut that.

All right, well, take one dollar out, sixty-six cents comes from police and fire, 10, 12 cents comes from the library, 10 cents comes from public works.

Um, so being cautious about where we when we start pulling back what that means and what that looks like.

Um, so I think that was my one question.

Otherwise, thank you all very much.

And um, I while I wish we had better news here, I know we're in good hands as we navigate this on the roadmap to recovery.

Thank you, Councilmember Hines.

Councilmember Rumba, or excuse me, Councilmember Walker, followed by Councilmember Rumba.

Thank you, Mayor.

Um, I know Councilmember Sidalge asked about the unfunded mandates from the state, and I know that you listed in there the millionaires' tax and the impact to the our sales tax revenue.

Um, but I didn't hear you say uh because maybe we don't know yet what what the impact is gonna be, and obviously sales tax is never a finite or specific number.

We you know that's a moving target, but do we have a sense of how much that is?

I I say this partly to understand our budget, but also so that the public knows that this is happening because it's impacting all the agencies.

You know, we all serve on boards of other agencies that are being impacted.

Like we're gonna lose a lot at a local level because of that, and I I'm a fan of it, and I I am really nervous about the unintended consequences of it at the local level.

So, how are we navigating that or budgeting for it, given it's a moving target?

I'm gonna try this.

Uh Councilmember Walker.

Um, so specifically for um when it comes to public safety um and and police requirements mandates, um, for every week, 40 hours of training that's mandatory based on it's that.

We always talked about that.

That no, I just thought that I got that answer, that's great.

I appreciate that.

Um, this is very specific to the millionaires tax.

Ah, gotcha.

And what the impacts are to local government.

So, Councilmember Walker, when we looked at that uh how much additional last fall when they did they switched on how they were taxing services for like janitorial services and security services, ID and software.

They switched it from the B and O and put it in the sales tax.

Sales tax is a higher rate.

That in theory, when we looked at it, it generated approximately two million extra dollars for us in sales tax revenue.

So when we look at when that goes away uh in 2029 or 2028, we'll lose that two million dollars that we are currently collecting, depending on the growth or changes in sales tax.

Additionally, in 2028, as Teresa had mentioned.

There's also exemptions then going in effect in the sales tax for you know, personal care, soap, shampoo, diapers, those kinds of things that will again pull some money out of what we're currently collecting because those are subject to sales tax now.

Um so again, we envision in the future, and you saw it on the graph.

Our forecast is we accounted that we're gonna right now, based on the current state law, we're gonna lose those dollars in 2028, 2029.

So that's my question.

What is what are those dollars?

What's that number?

It's about two million.

It'll be a little more than that with growth if sales tax grows.

Okay.

So that's that's it's approximately.

That wasn't just the one category.

No.

Okay, that's it's not as bad as I thought.

And just to add, um, so Andy can join me here and just share.

We're also remitting those sales taxes for services we did not pay for.

So that plus up of two million dollars in new revenues because that is being assessed.

We also provide contract services for janitorial services for our own our own facilities, including security services that we are now paying sales tax on that we didn't otherwise.

So it's not there, there is a nuance there as well.

So I just want to share that.

We can share that in detail as you all are uh traversing the I-5 down to uh Olympia.

Okay, thank you.

That that's really helpful.

Um I've had lots of conversations out in the world about this one and did definitely didn't understand it totally.

Um my other question is I know there you mentioned Andy, a bunch of things that are exempt.

Um that list exists somewhere.

Where should I find that like in the legislative documents or we can pull information from the department of revenue, we'll get you a list of sales tax exemptions, what's currently subject and what changes, but yeah, we can get that for you.

Because again, for the for people, there's a lot of good news in there, right?

I mean, I'm delighted that diapers and a lot of things that are on that list are exempt.

So I I don't want to paint it as a terrible thing, but it does have an impact to what we can do with the general fund.

So I think it's important to talk about.

Um, I just want to reiterate the uh well, I don't like all the numbers in here, that this is really a great um, there are great visuals of where we are and why we're there.

So I I really appreciate the presentation and I'm looking forward to getting that out to the public.

Um the budget calendar talks about um community outreach that and it looks like it's already started.

What have we done so far, and what have we heard from the community?

So the largest piece of what's already begun is the community survey, and I do have a phone, a friend that can provide a little bit more information about that, and you'll get a briefing later this month about that.

Um coming up, we'll be doing the balancing act tool on our website, and then start attending those neighborhood councils and events.

But that community surveys probably the biggest piece.

We have not yet um you know looked at what those results are.

Um, and I think they're not ready to be shared until later this month.

Yeah, later this month, we'll be able to share what we heard from the community in that.

Great.

And if there's any way that we can help on the council, I think all of us are getting questions about it all the time.

So if there's a way, I don't know if we could put things out to the community if if that's already planned, but happy to do that and actually would love to have some concise content that I can help share.

I think part of our community engagement will be including um items for like newsletters for the newsletters that you sent out or things that you could pull from our website as you know providing specifically to your districts.

Um so we'll we'll make sure that we work that into part of the plan.

Wonderful.

Thank you.

Thank you, Councilmember Rumbaugh.

Um, thank you.

Um, based on what Councilmember Walker just said, I just was wondering, and I don't remember hearing this in your report.

Um, but is there and I also just really appreciate um, this is such a good graphic.

Thank you so much, Teresa.

This is amazing.

Thank you.

It's really helpful.

Anna designed it.

Anna designed it.

Okay, great.

I really appreciate the creativity.

Thank you.

Um, it just makes it easier for people to understand.

But um, I didn't remember hearing, but are there any positives for our city on the millionaire tax?

Councillor Romba, um, you know, staff's position is is going to be fairly um agnostic on um what the impacts of uh uh, you know, what councilmember Sadogan mentioned about, you know, our position is that in terms of what Olympia does, the impacts, is there any positives?

Um, as Councilmember Walker just mentioned?

Staff's position is we are not taking a position on um collecting sales tax on hygiene products, those are good things ultimately from a human standpoint.

But there's no there's no financial benefit to our city, is what you're saying.

If we look at the history of Washington State, going back to the 90s, when um whether it's sales tax, compact changes or uh sales tax on groceries, um the the state of Washington has looked towards municipalities of equalization payments, those things have pulled off.

When the millionaires tax was being presented, um Alex McBain and our GR team probably could speak more on this, maybe offline or even in a presentation.

That would be great because in a lot of ways, what was being telegraphed in the early drafting of the legislation, there were conversations on helping support local governments through um indigent defense, if you remember that um in terms of a fund that was pulled out to balance.

Um we understand that, but as far as taking a position, Councilman Rumba.

Um Yeah, I'm not looking for a position, I'm just looking to see if there's any net positive for our city.

So far, you said there's a net negative of the two million based on the sales tax that we are collecting dollars that we would not otherwise, and it is gonna wind down.

So it's most it's very much like the conversation we're having here from a structural standpoint.

It's like ARPA, it will not be around because we're looking at that winding down.

So we don't see that positive.

Then also my next question is on um the property tax.

If there was a um if the cap was taken off and we were able to like every most cities would like to see happen, um, do we know what the revenue would be from that for our city?

I mean it wouldn't be this year, obviously, because we have to wait for the legislature.

Yeah, thank you, Councilmember.

But we did do a graphic, I'll have to pull it up, but I don't remember off the top of my head, it starts relatively slow, depending again what your assumption is.

Right now, the cap's one percent, and you have is the cap gonna be two or three, yeah.

Um, but then yeah, it starts kind of slow, but it builds over time, and it it does, but it's it's not uh a lot of money in the near term when you look at that gap.

But we have a graphic for it and we'll get you that analysis.

Okay, and then the other thing that you've had in the past, and I can't I think we were doing it based on housing prices, but we showed what it looked like for the other cities surrounding us so that people understand we'll we're a full service city.

Um we don't contract out for our police, our fire um for trash, and like trash pickup at your house.

Um so um it's I think people understand what level of service means, and I think there needs to be something that we share about surrounding cities and even the county on what services that we provide that you're paying for to be a part of the city, that these are where your taxes are going, so people understand that eliminating things means not having trash at your house, which of course we're not looking to do that, but that's what we're trying to that's why we're trying to save employees because we know that once you remove an employee level of service goes down, and it's it's hard to get it back up.

And I appreciate the way you talk about this because it makes sense.

The thing that we have that's really valuable are the people that work here and do the work, and I appreciate every single one of them.

Um, and that's what allows you to have the things that you want to have.

You flush the toilet, it goes where it's supposed to go, the water turns on, heat, um, and trash.

Trash I think is really important because I'm right on the border of Pierce County where they don't have trash.

You choose to have service, and um, so I just want to I just think we need to that needs to be reflected in our budget in the way we show the information, I think.

Council Member, that's a great suggestion.

We most um often do comparators when it comes to utility um bills.

Um, but from a general fund, cost of uh government, um, that's something we could look at, absolutely.

I appreciate it.

Thank you.

Councilmember Scott.

Thank you.

Um I appreciate the the update.

Um I appreciate you starting with the good news as well.

Um I just had a couple of clarifying questions uh just to make sure I was aware.

Um so on slide 18, you talked about the health care increase.

Um, and I think you said it, but I missed it.

How much is that cost expected to grow over the next like well, the next biennium, but also like the next six years, since that's kind of how we forecast it out.

Uh specifically on health care, we're looking at just over a 70% increase in the next six years.

That's that kind of compounding of around 10 to 11 percent per year is uh the current projection.

Thank you.

Um, and then uh around the parking collections.

Um I guess first when you when it says collections, is that any like is that somebody paying a tick like getting a ticket, not paying the ticket, or is it actually talking about like the ticket was you know issued, the person didn't pay, and it was sent to a collections like department that is now where it's like accruing interest or or things like that.

Yeah, exactly.

That we're seeing um the that those items sit in um collection status, whether with the city or with the collection agency and not not having the money actually come in.

Okay, so I just want to make sure.

Um so are there for things like is there are there things that we can be doing to help with that?

Um I know there is I had a ticket once and didn't realize I had it.

I don't know if I just was forgetful or if it fell off my car and I never saw it.

I'm not sure it was, but I I also never got like any follow-up, like, hey, just so you know you have a ticket, and so I was doing something completely different and couldn't find that information, but they're like, but you do have this ticket from like seven years ago.

Um and I was able to pay it, which you know, great, but I like I don't in that time I never received like a, you know, for like my if I ever had like an unpaid medical bill, they are knocking down my door, calling my phone, sending me letters.

So um are there are there things that we can do to put a little obviously that comes with a cost because that's you know, somebody having to do those calls and things like that, but is there other tactics we can use to kind of help get people to even if they have to start up a payment plan for their ticket or something like that?

That's a really great question.

I know our parking folks are working on that exact problem because they've looked at this and said how much collectible is sitting out there and what should we do about it.

So it's a problem they're working on right now as part of their budget proposals to talk about how they're gonna address those.

So more to come on that one, I guess.

Um I think the other questions I have were answered already, so I think that is it.

Thank you.

I appreciate it.

Right.

Uh any additional questions, comments.

I I do just have a few, unless City Manager you wanted to.

Okay.

Um thank you so much for the presentation.

Uh again, uh, ditto to the the graphics and overview, uh, the additional uh historical context, because I think um, you know, we hear from folks over and over again like you guys keep talking about the structural thing every two years.

Well, it's because it doesn't necessarily go away and and it for a variety of reasons that's been outlined before, and I can hear the frustration from some of my colleagues on that from you know the revenue options that the legislature uh so graciously provides the city um and um other challenges that they're trying to work through.

Um that you know, uh I'm not gonna get to that.

So uh one of the questions I had, um, especially I'm really alarmed by the increase in healthcare costs.

Um I really wanted to kind of ask a little bit more about how how do we are we negotiating those healthcare costs?

You mentioned an RFP going out to try and uh see if there's some more competitive plans out there.

Um have there been any conversations with our our labor partners as well as other like AWC, I know they do health plans as well with other cities, is there some benefit or opportunities for us to try to get a handle on this?

Um and obviously this is something that affects every single person that works in the city of Tacoma.

Um, and so we'd have to have a really long and robust conversation about what we can do to really manage this because 70% increase over six years is pretty unsustainable from my perspective, and it would put the city at really dire financial risk.

Yeah.

Deputy mayor, that's a that's a great uh question.

And actually, from your prompting, that's exactly all of the above, right?

We have to work righteously with our labor partners, our joint labor, local six and twenty-six and PPSMA, these are the the essentially the four groups that we need to discuss when it comes to health care uh benefits and what that looks like.

Um so it's probably premature at this time.

We have um had an initial conversation where I presented uh the roadmap to recovery uh slide deck.

I also telegraphed to our labor partners that this meeting today would be happening, so that they should be watching the for this meeting to take a look at this.

And then, you know, this in order for this to be a durable um solution when it comes to plan design, bargaining for what that looks like.

You know, you know, we are self-funded here at the city of Tacoma.

Um we have a uh we have intermediaries that are providing healthcare to us that we're we're contracting with all of that has to be bargained for.

Yeah and so um I think you'll see that we'll start the conversation this year.

We have some time and so much what I was going to close out today with is is exactly that.

We're gonna figure this out together and that's the key that we do it together that management is not taking a position that is not listening to our labor partners because quite frankly um we have the opportunity to open up our books and have a conversation and the public too is that other side to watching in what that looks like so yeah I mean we we all have a vested interest in making sure our healthcare plans are strong.

And I I really like the that we have the ability to self-insure um that helps us be able to keep control in-house um and you really um prioritize what matters to us our employees here uh at the city of Tacoma uh jointly with everybody um and but there are some trade-offs you know there there's some that we have to really consider and is is that is that something um that we're able to continue to do self-insure or maybe look to other uh partners to to have a wider pool which we we start losing control uh in that sense as well so uh if we want to maintain control of our health care plans and and and continue to do the RFPs then we have to kind of look at some trade-offs there to make sure that whatever we're doing sustainable and I think that our you know one of the great things about working for the city of Tacoma is the great compensation uh plan around it which includes healthcare um and so I think that there's uh some real benefits to being self-insured in that way um one of the other questions I had and I know you don't have the answer to right now but I'm really curious about uh and this and what triggered this in my mind was um some of the conversation around our speed cameras um and the the state giving uh graciously giving us the opportunity to uh expand our our uh speed camera programs um and some of those revenues coming back to the city in order to um you know for safety improvements and things that nature I'm really curious as to what other locally uh operated programs have remittances to the state um and what those dollar amounts are because um where that level is at you know especially for these uh programs uh like uh the speed camera program specifically I I'm personally not very uh thrilled with the amount that the state's asking for I'm not saying that they can't ask for that I think it's uh certainly fair but I think that there's some level of um who's it actually administering it and uh operating it and where that money is going um and I know that the there's some revenue that the state is is looking to pull out of there now I'm curious of like what other locally run programs that the state is asking us to remit payments to for uh the allowance to be able to do those things.

So I'm just I'm just curious of what that is and it could be just not that much but it I I don't know it could be more.

And then the other the other final thing that I had is I I appreciate that you you hit on the general fund sources on page 20 in that that breakout and I I struggle with the our our continued structural deficit and our can our deferred maintenance and and capital and equipment.

That's I I that that's a scary number to me and I almost feel like it's kind of it it's it's obvious we're being very transparent about that number being there but I um those are real impacts to levels of services those are real impacts to the employees that work for the city.

There's a real impact to the community at large and unless we can find a way and I know we're dealing with the operating gap but then there's part of the reason part of the way that we help deal with the operating gap historically was deferring maintenance and now we're at the deferral of maintenance of my 830 million dollars.

So I I where does the where does the the camel camel's back break so to speak um you know, I we still have fire stations that are homes, literal homes.

We have we have um you know folks um using porta potties at a fire station, like I, you know, there's there's health and safety issues, you know, which goes back to our health insurance, you know, uh, you know, issues as well.

You know, so it does compound a lot of expenses over time for the city.

I just I haven't really seen a really a real clear uh solution to this.

And I just I guess I'm throwing that out there.

I will bite Deputy Mayor.

Um I'll bite at that one.

Um, in so much as what you're presenting here is uh it's the levers we've pulled when it comes to deferred maintenance or you know equipment repair replacement.

Um, those are the levers we pulled over the last decade to get to this point.

I also think conversely, light at the tunnel is I think about the wherewithal for us to solve this over the next two to four six years, it may take longer than that.

But as we pare that down and we free up dollars in ways we deliver services to our public.

If we can free up dollars, the way I think about this, I need Andy to close his ears here.

But if we can actually have those dedicated dollars be dedicated to a bond, we can get ahead of this, right?

Because in a lot of ways, if you look at the Connect Tacoma package, the streets initiative package, um, that is 10 20 million dollars a year for 10 years.

You know, you start making big strides in that, and you see our residency government working, it just confides confidence.

And if anything that's giving me any confidence in what we have before us is a challenge as a city, again, to Councilmember Heinz's point, we're looking at a five to six percent uh general fund structural deficit.

Um it's still something we could tackle now.

If we wait too long, those options starts going out.

Other municipalities are gonna be doing this right now.

We're gonna be on the upswing again.

I firmly believe that, and that's why I think this is solvable.

If we pass a bond in the future, and that is what we're gonna be telling our citizens that that is what success looks like.

I'm okay with that.

Um whether or not the council is okay with that's the solution.

We're gonna actually take care of our uh our facilities, our fire stations, um, our community centers, those kinds of things.

I think that's a value proposition that I think the community would ask for.

Yeah, and a lot of our substations for the police department are in are in need of upgrades and and changes as well.

Um, and I always think about whenever it comes to our facilities, the life cycle.

Um, and unfortunately, I'm not sure that's always thought of uh when these things are built.

You know, particularly you know, we're looking at the Tacoma Dome and all the needs it has there.

It's a great facility, obviously, room for improvements.

Um, and I think you know, especially the Tacoma Dome specifically, it gives you opportunity for bringing in more talent and more economic activity as well, especially when you have upgraded facilities.

And we've seen that especially with some of the investments already made.

Um, so really appreciate the folks at TV and E and what they're doing over there with what they have.

Um, yeah, I just it's a lot.

Um, that's that's really the gist of my questions.

Thank you for that.

Um, and thank you for the presentation.

Uh really looking forward to working with everybody to find a way forward here.

Deputy Mayor, I just wanted to close this out here, uh, from a staff perspective.

Today is the day that we're presenting to you a revised forecast.

Um, there is certainly some news that is hard to take from a revised forecast that is uh an increase from February's forecast.

Um, this is the challenge statement.

Um, I'm just gonna lead or end this by saying this team, Director Trello and the team and myself, we'll be presenting a balanced budget for you for consideration.

It's gonna require some tough choices, but we have options to take those.

We're gonna work with our team, we're gonna work with our employees uh to work towards that.

It's gonna require us to do a little bit of everything.

I do not want to lose sight of the fact that we also have to provide services.

So it's not an austerity budget.

That's not what I'm presenting come September.

It's a realistic budget based on preparatory steps that we have to start taking over the coming years.

And so much of what we're before us, it's in partnership with you all and what you're gonna hear from the community as uh the community is gonna ask us to not change our prospective uh businesses we serve may ask us not to change when you have a forecasted gap that in four five years shows us at a 10, 15 percent uh general fund structure, changes what's on the table.

We have to be open to change.

And uh I look forward to bringing that to you.

Um my next touch point with the council is probably in early July for a updated uh roadmap to recovery um uh cost containment update for how much dollars we've saved.

Um your staff, Director Trillo, and all the directors are making immense um sacrifices right now in terms of holding positions vacant to preserve cash wherever we can.

We're also gonna be talking about the initial reduction strategies for our internal and external departments at that time, too.

It's gonna be 10 million dollars potential reductions.

I just want to forecast that.

So our public's listening to this.

We have some hard decisions, but they will net out to better services one day for the community as well.

So I just wanted to close that out.

Thank you very much.

Yeah, thank you.

I do want to mention through all of this, we're still we still have fully funded reserves, um, which I think historically has never really been the case for the city, if I recall.

I can't imagine a time where we've actually so we're we're as dire as this looks where we have a lot of options, and I it's really important that we address this while we still have options, and you don't have to look too far to see what it looks like when you lose all your options.

Um, and so it's really important that we're uh being thoughtful about tackling these issues early and and in in conversation with everybody and trying to preserve our options and ability to be nimble as a city to really address these structural problems.

So thank you.

All right, thank you very much.

All right, uh next up we have our second agenda item, which is a council consideration request, uh Juneteenth prayer breakfast.

Uh this has been brought forward by Mayor Ibsen.

Um, so this is a sponsorship request that he's bringing forward to support the Juneteenth prayer breakfast event that kicks off the day of celebration that will be held at the LeMay Museum that oversees over 20,000 attendees from across the state.

And this year's themes of freedom, economic justice, accountability, and hope underscore the importance of creating pathways to economic mobility and strengthening partnerships that support thriving communities and sponsorship of this event supports critical event logistics programming while demonstrating the city's commitment to recognizing Juneteenth, both as a celebration of freedom and a call to action.

Um I would like to thank uh myself, Deputy Mayor Bushnell, uh Mayor for bringing this forward, uh, Councilmember Heinz and Palmer's for their support in this request.

Um, and um this will be brought up in next week's council agenda.

And uh, if there are any questions, uh the mayor is here to answer them.

Thank you.

Thank you, Deputy Mayor, and uh appreciate you covering for me to take a quick call and uh thank you so much for your support as well as um uh council members uh Heinz and Palmer for supporting this.

Um, this isn't just about the event Juneteenth itself, this is about uh demonstrating in action our city's uh values of equity and empowerment and partnering with um the community groups to really make it possible.

So thank you to everyone for bringing it forward and uh looking forward to seeing it uh um be unveiled and uh rolled out as we speak.

Uh any other comments from co-sponsors or anyone else, all right.

Well, thank you very much.

Um this will be brought forward soon.

Moving on to committee reports or excuse me, uh, before we move on to committee reports, uh, unless there are any other items of interest.

Okay, any committee reports from the council.

Seeing none, uh moving on to the city manager's weekly report.

I'd like to call on Deputy City Manager Elison Griffith.

Thank you, Mayor.

Mayor and Council for this evening's meeting.

There's one ceremonial on tonight's agenda.

That's proclaiming Tuesday, June 9th, 2026, as Mayors for Peace Day.

There are no modifications to tonight's agenda.

There are two opportunities for public comment this evening.

The first is under regular public comment regarding motions, resolutions, and ordinances on tonight's agenda.

The second opportunity is under community forum regarding items over which the city council has jurisdiction.

Please let me know if there's any questions related to tonight's agenda so that we can be prepared to respond accordingly and for your review attached to the study session agenda was the weekly report.

Thank you, Mayor.

Thank you, Deputy City Manager.

Um, now I will entertain a motion to convene to an executive session uh pursuant to RCW 42.30.110 sections 111 and 2 to discuss potential litigation not to exceed 15 minutes.

So moved.

Second.

Move and second.

All those in favor say aye.

Aye.

I'll supposed to say no.

Further provided, I'll also entertained a motion to convene to a closed session uh for uh under RCW 42.30 point 140 sections 4A and B to discuss labor strategy not to exceed 60 minutes.

So moved second.

Move and second.

Those in favor, say aye.

Aye.

Those opposed to say nay.

Alright, we are going to begin.

Uh executive and closed session.

I'd like to reconvene the study session of City Council, uh, to adjourn.

Uh, we stand adjourned.

Thank you.