(The Center Square) – Spokane might end 2025 with a small budget surplus once local officials finalize the city’s books, despite annual sales tax growth falling short of the chief financial officer’s projections.
Spokane Mayor Lisa Brown and CFO Matt Boston meet with the city council Thursday to discuss the inflation-adjusted squeeze ahead of budget discussions later this year for the 2027-28 biennium. They balanced a $25 million deficit heading into 2025, and closed another $13 million gap last fall for 2026.
Boston said 2025 proved to be one of the most volatile years on record for sales-tax growth. Spokane had to pull back on spending to keep everything balanced. Growth fell short of his projections in a few months but exceeded them in others. He says the back-and-forth makes it difficult to issue future projections.
“It’s going to be pretty close,” Boston said. “We’re expecting it to be balanced, if not a small surplus.”
The city noticed the sales tax trend early in 2025 and directed departments to stay on top of expenses and personnel. A fairly mild winter also saved money on warming centers; emergency shelter services were shifted to grant-supported funding, and police and fire overtime spending began trending down.
Deputy City Administrator Maggie Yates said the Spokane Police Department and Fire Department are both expected to reach full-staffing levels this summer for the first time on record. If that holds, it could provide additional savings by reducing reliance on overtime and filling up the agencies’ relief pools.
Boston also said that bond refinancing could provide another $6.7 million in savings in the near future by reducing debt service costs. However, with inflation outpacing sales-tax growth, he warned that the city is losing ground financially as it faces several major capital and service obligations in the near future.
“We lease space or have shared costs for space at the county campus, the public safety building and the court annex. The county has indicated that they will pass through clean energy upgrades to the city at around $10.8 million,” Yates said, warning that the state’s noncompliance penalty amounts to $840,000.
Police and fire vehicle costs have also skyrocketed over the last decade, with the sticker price of some fire engines rising 122% to 175% since 2016, she said. The city also anticipates nearly $17.4 million in capital investments for its community centers over the next decade, in addition to operational funding.
City staff expects to return with a six-year general fund forecast by July. Last summer, those numbers projected a $19 million to $26 million deficit by 2027. Combined with 2028 for the two-year biennium, the total deficit could hit $39.6 million to $57.7 million, according to the forecast presented on July 17.
Boston projected a 2% increase in sales tax revenues for 2025, but said it’s currently sitting at about 0.7%.
He budgeted 2.9% in sales tax growth for 2026, but after the dais modified the budget last November, the assumed growth fell to 0.77%, from $60 million in 2025 to $60.46 million in 2026.
Councilmember Michael Cathcart told The Center Square that he thinks they should budget 0% growth for next year.
“I suggested that we consider a … 0% growth estimate, and if there is growth in the sales tax or tax revenues, that a priority for those dollars would be that they go into reserves to help build those back up,” Cathcart said. “That’s been my suggestion; it hasn’t really been well taken.”
The administration and council have turned to tax increases to help close the last two deficits, despite his wishes, as Cathcart is part of a slim minority on the dais. The council majority has a few options to raise taxes next year, but Cathcart said it’s time to “rip the band aid off” and make “difficult decisions.”
“I fully expect there will be a deficit … I don’t have a current projection that’s firm, but I will tell you that in the recent past, the last couple of months, our budget director for council has surmised that it could be in the $20 million range for the upcoming biennium, but so much of that is up and down,” Cathcart said.
