HomeMy WebLinkAboutWS 2025-07-21 Item 3B - Presentation - Revenue Proviso ReportCity of Tukwila
Thomas McLeod, Mayor
INFORMATIONAL MEMORANDUM
TO: City Council
FROM: Aaron BeMiller, Finance Director
CC: Thomas McLeod, Mayor & Marty Wine, City Administrator
DATE: July 21, 2025
SUBJECT: Revenue Proviso
ISSUE
During the development of the City’s 2025 – 2026 budget, the Mayor’s stated priority for his
team in 2025 was to complete a formal review of current operating expenses and revenue
generation to provide options for creating a sustainable budget in preparation of the 2027 –
2028 budget process. The Ordinance adopting the 2025 – 2026 budget included a revenue
proviso in Exhibit A directing the Finance Department to return midyear to present and discuss
potential additional revenue options.
BACKGROUND
The City maintains a six-year financial forecast for the General Fund. Forecasting is a long-
term planning tool that encourages strategic thinking and provides decision-makers with tools to
allow for making more informed business decisions by focusing on long-term objectives and the
future impact of current decisions. The current forecast was discussed with Council as part of
the 25/26 budget process and demonstrates that over time, our current expenses, at status quo
levels, will continue to increase at a rate that exceeds increases in revenues.
The City is legally required to adopt a balanced budget where resources are at least equal to
budgeted expenses. However, adopting a balanced budget does not necessarily mean the
budget is sustainable. A sustainable budget exists when normally occurring operational
revenues are equal to normally occurring and ongoing expenses and where extraordinary
resources are used for one-time expenditures.
Like most government entities, the City is experiencing a budget sustainability challenge where
expenses increase each year at a rate that exceeds the growth of resources. Forecasted
revenues for 2027 – 2030 increase by an average of 2.7% annually while expenses for the
same period increase by 3.6%. This structural imbalance demonstrates that without a new
revenue source, an increase in current revenues, decrease in expenses, or a combination of
those things, the City will need to balance its budget over time using one-time resources. This
budget model is not sustainable over more than just a few years.
Administration has already taken up the challenge in 2025 to begin work on solutions to achieve
a sustainable budget over time. Difficult choices will need to be made about ongoing City
services and operations. Mayor and Council priorities and the City’s strategic plan will be used
to guide those conversations.
DISCUSSION
This report has been created and designed to satisfy the Revenue Proviso included in the 2025
–2026 budget Ordinance. An accompanying presentation to the City Council to discuss the
report will take place in July 2025. In addition, this revenue report is a component of a larger
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INFORMATIONAL MEMO
Page 2
city-wide effort aimed at creating a sustainable budget. The Budget Sustainability effort
includes five (5) workgroups:
•Immediate Changes, Efficiency Improvements, Out of the Box
•Revenue Options (Revenue Proviso)
•Salary and Benefits Policies
•Operating Expenditures
•Capital & Utilities Maintenance & Improvement Expenditures
The report presents fifteen potential revenue options available to the City under current law.
Each option includes information on estimated revenue potential, time to implement,
administrative effort, legal and procedural requirements, and who ultimately bears the cost.
Additionally, Appendix B of the report includes an additional thirteen revenue options that can
be explored further but have been excluded from the potential options for specific reasons. The
reasons for exclusion from the potential options are included in Appendix B.
Importantly, this document is not a set of recommendations. It is a technical resource designed
to support informed policy deliberation. City staff are available to provide additional analysis if
the Council or Mayor would like to explore any of the options in greater detail. Along with the
separate work to review expenses, this report is intended to help City leadership develop a path
toward long-term financial sustainability.
The Mayor will provide the City Council with his recommendations for creating a sustainable
budget later this fall or winter. The recommendations, including any modifications made in
partnership with the City Council, will be included in the City’s budget process and planning for
the 2027 – 2028 biennium budget.
FINANCIAL IMPACT
Discussion item only. There is no financial impact associated with this agenda item.
RECOMMENDATION
Discussion item only. There is no recommendation currently for future action.
ATTACHMENTS
A.Revenue Proviso Report
B. Revenue Proviso Presentation
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City Council Proviso:
Revenue Options
July 2025
Attachment A
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2 16
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The Revenue Proviso team and Proviso report is a cross-departmental effort. The team first
met on January 9, 2025 and subsequently met multiple times to define project scope, assign
work tasks, and provide input into the report.
The Mayor and City Administrator extend their appreciation to the Revenue Proviso Team for
the work required to produce this report. Further, special recognition is extended to Tommy
Conkling, Fiscal Coordinator, for his work on the Proviso Report.
Proviso Team:
Aaron BeMiller, Director, Finance Department
Jake Berry, Public Safety Analyst, Police Department
Tommy Conkling, Fiscal Coordinator, Finance Department
Tony Cullerton, Deputy Finance Director, Finance Department
Catrien de Boer, Grants Analyst, Public Works
Nora Gierloff, Director, Department of Community Development
Griffin Lerner, Public Works Analyst, Public Works
Megan Marks, Fiscal Manager, Finance Department
Alex McDonald, Fiscal Coordinator, Finance Department
David Rosen, Parks & Recreation Fiscal Analyst, Parks & Recreation
Adam Schierenbeck, Fiscal Manager, Finance Department
Sherry Wright, Fiscal Manager, Finance Department
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Contents
Executive Summary ................................................................................................................... 5
Purpose of This Report .............................................................................................................. 8
How to Use This Document ....................................................................................................... 8
Dimensions of Analysis .............................................................................................................. 9
Overview of All Revenue Options ............................................................................................. 11
Revenue Options Detailed Analysis ......................................................................................... 15
1. Business & Occupation (B&O) Tax Changes ................................................................................ 15
2. Property Tax Banked Capacity ..................................................................................................... 18
3. Property Tax Levy Lid Lift ............................................................................................................. 21
4. Sales Tax: Transportation Benefit District ..................................................................................... 24
5. Sales Tax: Criminal Justice (HB2015, New Authority) ................................................................... 26
6. Sales Tax: Public Safety (RCW 82.14.450) .................................................................................. 29
7A. Admissions Tax Changes: Nonprofits ......................................................................................... 32
7B. Admissions Tax Changes: Bowling ............................................................................................ 33
7C. Admissions Tax Changes: Foster Golf Course ........................................................................... 34
8. Gambling Tax Changes ................................................................................................................ 35
9. Interfund Utility Tax Changes ....................................................................................................... 36
10. Increase Franchise Fees for External Water and Sewer Districts ............................................... 38
11. Permitting Cannabis Sales ......................................................................................................... 39
12A. External Utility Taxes: Electricity .............................................................................................. 41
12B. External Utility Taxes: Solid Waste ........................................................................................... 42
12C. External Utility Taxes: Telephone ............................................................................................. 44
12D. External Utility Taxes: Natural/Manufactured Gas .................................................................... 45
12E. External Utility Taxes: Cable TV ............................................................................................... 46
13. Burglary Alarm Permits .............................................................................................................. 47
14. Parking Tax Changes ................................................................................................................. 49
15. Indirect Cost Recovery for Grants .............................................................................................. 50
Appendix A: Potential Variance and Ramp -Up in Revenue Collection ..................................... 52
Appendix B: Revenue Ideas Excluded from Analysis .............................................................. 66
Appendix C: Expected Future Impact of Inflation on Major City Revenues.............................. 72
Appendix D: General Fund Forecast Made In Fall 2024 .......................................................... 75
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Executive Summary
The City maintains a six-year financial forecast for the General Fund. Forecasting is a long-
term planning tool that encourages strategic thinking and provides decision -makers with tools
to allow for making more informed business decisions by focusing on long-term objectives and
the future impact of current decisions. The City of Tukwila is facing a structural imbalance
between its recurring revenues and ongoing expenses. If this imbalance is not addressed, the
General Fund could exhaust its reserves within a few years. For reference, the six-year
General Fund forecast as presented in the 2025 – 2026 budget is included in in Appendix D at
the end of the report.
The Mayor has described the 2025 – 2026 budget as a transitional budget, one that is
balanced and provides for the continuation of city services at least at their current service
levels, but uses one-time resources to pay for ongoing operations. The Mayo r’s stated priority
for 2025 is for his team to work on finding solutions to achieve a sustainable budget over time,
beginning with the 2027 – 2028 budget. This report was developed both in response to a
formal request by the City Council to evaluate potential new revenue sources and as one of
the components of the larger budget sustainability work currently underway to address the
Mayor’s priority. Further, the report is intended to support long-term financial planning and
decision-making by providing a resource for decision makers on available revenue options .
This work was preceded by the formation of a community-based Financial Sustainability
Committee in 2024 that was tasked with key questions regarding prioritization of limited
financial resources, using the right tools to achieve long-term sustainability, calibrating city
services and programs with the community members’ desires and willingness to pay and
distributing impacts to residents and businesses in the most equitable and balanced way. The
April 2024 report informed this revenue research and continues to inform the larger budget
sustainability work.
The City’s 2025 – 2026 biennial budget was adopted by the Tukwila City Council on November
25, 2024. The biennial budget is balanced but includes one-time resources to fund ongoing
operations in both years of the biennium. As part of the budget sustainability conversations
between the Mayor and the City Council during the budget deliberations, the budget Ordinance
(Ordinance No. 2749) included the following Proviso language in Exhibit A:
“Throughout the rigorous biennial budget process, it has become clear that the City cannot
depend exclusively on cost-cutting measure to address future budget deficits. To ensure long -
term financial stability, it will be imperative to identify new revenue sources and strengthen
existing revenue streams. The City Council has directed the Finance Department to return
midyear to present and discuss potential additional revenue options”.
Tukwila’s budget challenges are not unique. Cities across Washington face similar constraints
due to the state’s revenue structure. Taken together, the two main pillars of General Fund
revenues, property tax and sales tax, have not kept pace with inflation. From 2014 to 2024,
property tax revenue declined by nearly seven percent after adjusting for inflation, and sales
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tax revenue increased by just over one percent (see Appendix C for more information).
Meanwhile, the cost of providing existing public services continues to rise, and the City has
gradually provided more services to the community over time. The City has already taken
several major steps to address the growing gap between revenues and expenditures, including
the implementation of a Business & Occupation (B&O) tax and annexation into the Puget
Sound Regional Fire Authority (PSRFA). Still, forecasts developed in 2024 show that from
2027 to 2030, revenues are expected to grow at an average rate of 2.7 percent per year, while
expenditures are projected to grow at 3.6 percent.
This report has been created and designed to satisfy the Revenue Proviso included in the
2025 – 2026 budget Ordinance. An accompanying presentation to the City Council to discuss
the report will take place in July 2025. In addition, this revenue report is a component of a
larger city-wide effort aimed at creating a sustainable budget. The Budget Sustainability effort
includes five (5) workgroups:
• Immediate Changes, Efficiency Improvements, Out of the Box
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• Revenue Options (Revenue Proviso)
• Salary and Benefits Policies
• Operating Expenditures
• Capital & Utilities Maintenance & Improvement Expenditures
This report presents fifteen potential revenue options available to the City under current law.
Each option includes information on estimated revenue potential, time to implement,
administrative effort, legal and procedural requirements, and who ultimately bears the cost.
Revenue options include changes to property taxes, sales taxes, utility taxes, and admissions
taxes, as well as new options such as revenues from permitting cannabis sales.
Importantly, this document is not a set of recommendations. It is a technical resource designed
to support informed policy deliberation. City staff are available to provide additional analysis if
the Council or Mayor would like to explore any of the options in greater d etail. Along with the
separate work to review expenses, this report is intended to help City leadership develop a
path toward long-term financial sustainability.
The Mayor will provide the City Council with his recommendations for creating a sustainable
budget later this fall or winter. The recommendations, including any modifications made in
partnership with the City Council, will be included in the City’s budget process and planning for
the 2027 – 2028 biennium budget.
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Purpose of This Report
This report was developed in response to a formal request by the Mayor and by Tukwila City
Council for information on potential new revenue sources available to the City. It is intended to
support the Mayor and Council as they evaluate options for addressing the City’s long -term
structural budget imbalance—an imbalance in which expenses are projected to grow faster
than revenues, even under conservative assumptions and without new programs , staffing
increases, or reliance on one-time revenues.
The City of Tukwila, like many local governments in Washington, is constrained by a state
policy environment that limits local revenue flexibility, particularly regarding property tax growth
and other general fund revenues. At the same time, the cost of ma intaining existing services is
rising due to inflation, labor market pressures, and aging infrastructure. Residents and
businesses also expect the City to provide greater levels of service, which increases costs.
Recognizing these pressures, the Mayor has charged City management with identifying
strategies to improve long-term financial sustainability. This includes both increasing revenue
and more aggressively controlling expenditure growth. Although the City’s work to evaluate
expense reductions is still underway, the revenue analysis began earlier and is being
presented first. These two efforts, revenue analysis and expenditure analysis, are intended to
complement each other as part of a broader strategy to strengthen the City’s financial outlook.
This report provides a comprehensive overview of revenue options currently available to the
City under existing state law, including options that are councilmanic—legislated and
authorized by the City Council—and those that may require voter approval. Each revenue
analysis includes estimates of potential revenue yield, implementation timelines, legal
authority, administrative effort, and equity considerations for each option. No specific
recommendations are made; instead, the report is structured to support Council and Mayoral
deliberation by offering a clear, consistent analysis across a wide range of revenue
mechanisms.
Ultimately, this document is intended to be a technical resource, not a policy directive. It
frames the revenue choices available to the City of Tukwila in the context of its legal,
economic, and political environment. Council and the Mayor will determine the next steps,
including which options to advance for further public engagement or implementation.
How to Use This Document
This report is intended to support informed policy deliberation by City Council, the Mayor, and
other stakeholders by providing detailed, consistent, and accessible information about revenue
options available to the City of Tukwila. It is not a policy reco mmendation, but a foundation for
Council to weigh tradeoffs and initiate the next steps in addressing the City’s structural budget
imbalance.
Readers should use this document to:
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• Understand the landscape of options: The report provides an overview of all identified
revenue tools available under current Washington State law, along with detailed profiles of
each.
• Compare revenue tools side-by-side: Each option is presented using a consistent set of
criteria to enable comparison of factors such as revenue potential, time to implement, legal
requirements, and administrative effort (see Dimensions of Analysis)
• Identify follow-up questions and areas for further analysis: The information presented
here represents staff knowledge as of the date of this report. City Council or staff may
determine that further legal, financial, or community engagement work is needed to
advance a given option.
The report is organized to begin with a summary table of all options, followed by detailed
analysis of each. Appendices provide additional context, including:
• Potential variance and/or ramp-up in revenue collections for the listed revenue options
• Revenue options considered but excluded
• Technical notes on inflation-adjusted revenue trends
City leadership may use this document in conjunction with the parallel work being conducted to
more aggressively control the growth of expenditures. Together, these efforts are intended to
support a long-term, sustainable financial future for the City of Tukwila.
Dimensions of Analysis
Each revenue option is presented through several dimensions of analysis. These dimensions
of analysis include:
• Estimated Annual Revenue: The amount of revenue expected to be collected from the
given revenue option. This is presented as a point estimate (a single number). It should be
understood, however, that the true amount collected could vary from this estimate.
• Time to Implement: An estimate for how long a given revenue option would take to
implement.
• Offsetting Expenditures: Costs that the City would incur to collect a given revenue. This
reduces the net financial benefit to the City.
• Implementation Requirements: Legal, procedural, or technical considerations that are
needed to implement a revenue option.
• Administrative Effort: A description of the effort and complexity involved in implementing
and collecting the revenue.
• Peer Usage: A listing of peer governments that collect a given revenue. Where feasible,
specific financial information about the rates or amounts collected by peers is provided.
• Who Pays: A description of the people, organizations, or other parties that would be the
actual payers of the revenue option.
• Equity Implications: An assessment of how the revenue option affects different income
groups and communities. This analysis usually considers whether the revenue option is
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regressive (disproportionately impacts lower-income households), progressive (higher-
income households pay a larger share relative to their income), or proportional (affects all
income levels equally). Most revenue options available to local governments in Washington
State are regressive. Washington State has the second-most regressive state and local tax
structure in the country.1
• Other Considerations: Any information that may be important for consideration and
analysis of the revenue option that does not easily fit into the dimensions of analysis listed
above.
1 Institute on Taxation and Economic Policy, "Washington: Who Pays? 7th Edition," ITEP, accessed June 2, 2025
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Overview of All Revenue Options
Listed in approximate order of total possible revenue
Revenue Type Estimated Annual
Revenue
Offsetting
Expenditures
Administrative
Effort Who Pays Implementation
Authority
1. B&O Tax Changes
Year 1: $955,000
Year 2: $2,988,000
Minimal Moderate Businesses Councilmanic
2. Property Tax
Banked Capacity Up to $6,000,000 None Low
Property Owners
Some of this tax is
passed onto renters
Councilmanic
3. Property Tax Levy
Lid Lift
Only feasible if
banked capacity were
fully used
$995,100 per every
$0.10 increase to the
levy rate
None Moderate-to-High
Property Owners
Some of this tax is
passed onto renters
Voter-Approved
4A. Sales Tax:
Transportation Benefit
District, Councilmanic
$2,791,000
Year 1: $50,000
Additional Years:
$25,000
Moderate Consumers Councilmanic
4B. Sales Tax:
Transportation Benefit
District, Ballot
Measure
$8,375,000
Year 1: $50,000
Additional Years:
$25,000
Moderate Consumers Voter-Approved 25
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Revenue Type Estimated Annual
Revenue
Offsetting
Expenditures
Administrative
Effort Who Pays Implementation
Authority
5. Sales Tax: Criminal
Justice
(HB2015, New
Authority)
$2,791,000
Plus potential grant
funds from the Local
Law Enforcement
Grant Program
None, unless
penalties are imposed
for noncompliance
Moderate Consumers Councilmanic
6. Sales Tax: Public
Safety
(RCW 82.14.450)
$2,370,000
Plus potential grant
funds from the Local
Law Enforcement
Grant Program
None Moderate Consumers Voter-Approved
7A. Admissions Tax
Changes – Nonprofits $557,000 Minimal Low Consumers Councilmanic
7B. Admissions Tax
Changes – Bowling $70,000 Minimal Low Consumers Councilmanic
7C. Admissions Tax
Changes – Foster
Golf Course
$90,000 Minimal Low Consumers Councilmanic
8. Gambling Tax
Changes
$400,000 per 1%
increase None Low Casinos Councilmanic 26
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Revenue Type Estimated Annual
Revenue
Offsetting
Expenditures
Administrative
Effort Who Pays Implementation
Authority
9. Interfund Utility Tax
Changes
$295,000 per 1%
increase Minimal Low Consumers Councilmanic
10. Increase
Franchise Fees for
External Water and
Sewer Districts
$280,000 $10,000 in Year 1 Moderate Utility Districts and
Consumers Councilmanic
11. Permitting
Cannabis Sales
Year 1: $175,000
Year 2: $200,000
Year 3: $250,000
Potential increase in
public safety-related
expenditures
Low-to-Moderate Consumers and
Businesses Councilmanic
12A. External Utility
Taxes – Electricity
$317,000 per 1%
increase None Low Consumers Voter-Approved
12B. External Utility
Taxes – Solid Waste
$138,000 per 1%
increase None Low Consumers Councilmanic
12C. External Utility
Taxes – Telephone
$113,000 per 1%
increase None Low Consumers Voter-Approved
12D. External Utility
Taxes – Gas
$126,000 per 1%
increase None Low Consumers Voter-Approved 27
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Revenue Type Estimated Annual
Revenue
Offsetting
Expenditures
Administrative
Effort Who Pays Implementation
Authority
12E. External Utility
Taxes – Cable TV
$28,000 per 1%
increase None Low Consumers Councilmanic
13. Burglary Alarm
Permits $81,000 Minimal Medium Person/Business with
Registered Alarm Councilmanic
14. Parking Tax
Changes
$53,000 per 1%
increase None Low Consumers Councilmanic
15. Indirect Cost
Recovery for Grants $40,000 None
Year 1: Moderate
Ongoing Years: Low
Agency Awarding the
Grant
Administrative,
Councilmanic
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Revenue Options Detailed Analysis
1. Business & Occupation (B&O) Tax Changes
With Accompanying Business License Changes
Description
Increase the B&O gross receipts tax rates and reduce the gross receipts tax
threshold; add a square footage component to B&O tax; replace the per-
employee Business License fee with a flat fee/tiered fee structure.
Estimated Annual
Revenue
Year 1: $955,000
Year 2: $2,988,000
Time to Implement Six months
Offsetting
Expenditures
Minimal
Implementation
Requirements
• Amend TMC Chapters 3.26* and 5.04.
• Adopt new Business License Fee Resolution.
• Coordinate the Business License fee changes with the WA Department of
Revenue (DOR)
*Note that the B&O tax increase in TMC Chapter 3.26 is subject to
referendum as set forth in RCW 35.21.706.
Administrative Effort
The administrative effort is moderate. City staff will need to complete the
following:
• Amend TMC Chapters 3.26 and 5.04
• Coordinate the Business License fee changes with the DOR
• Update public guidance and tax forms on the City’s website
• Provide timely advanced notice to businesses
There will be additional administrative effort on an ongoing basis associated
with administering the B&O tax due to an increase in the number of
businesses required to file returns (as a result of the lower gross receipts tax
threshold). Additional administrative effort may also arise from the need to
educate businesses regarding the square footage tax and verify that square
footage tax is reported correctly.
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Peer Usage
Neighboring cities (except for SeaTac) currently impose B&O tax at higher
rates and with a lower threshold as compared to Tukwila. Two neighboring
cities, Kent and Auburn, also impose square footage tax. The tax rates and
taxable thresholds vary among cities.
The Association of Washington Cities (AWC) publishes a list of cities’ gross
receipts B&O tax rates and thresholds annually here.
Who Pays Persons engaging in business pay for the B&O tax and Business License
fees.
Equity Implications
B&O tax revenues are proportional as the tax is based on a percentage of
gross income received by the business and the size of business facilities
located within the City.
The proposed changes to the Business License fees will have a variable
impact. As compared to the current fee schedule, the fee will decrease for
some businesses, and for others it will increase. Since the proposed Business
License fee is a flat amount irrespective of the amount of gross income
earned by the business, it is predominantly regressive in nature since lower-
income businesses pay a larger percentage of their income.
Other Considerations
While changes to the B&O tax will result in additional administrative effort,
efficiencies will be gained by implementing a tax administration and online
filing software solution, which is currently in development. As a result, based
on the information currently available, there are no additional expenses
associated with revenue collection.
To the extent that additional staff are employed to administer City taxes and
business licensing, it is reasonable to assume that additional staff could result
in revenue gains which may exceed additional costs incurred.
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Business & Occupation Tax Revenue Option
Gross Receipts Minimum Threshold Gross Receipts Tax Rates
In Tukwila
$100,000
Companywide
$500,000
Retail Sales/Services
0.0012
All Other Activities
0.0017
Square Footage Minimum Threshold Quarterly Square Footage Rates
For annual filers, these rates are multiplied by four
Warehouse Other Floor Space Warehouse Other Floor Space
4,000 12,000 $0.12 $0.02
Business License Fee Revenue Option
Non-
Resident
Home
Occupation General Business
$150 $75
• $150 for 0-10 employees
• $300 for 11-25 employees
• $500 for 26-50 employees
• $750 for 51-100 employees
• $1,000 for 101 or more employees
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2. Property Tax Banked Capacity
Description
A jurisdiction can choose to levy (collect) less than the maximum allowable
property tax increase each year. This unused tax capacity is "banked,"
meaning it can be used in future years without exceeding legal limits.
In December 2024, the City banked $6,000,000 in property tax capacity,
recognizing that property owners in the City would soon be impacted by fees
paid to the Puget Sound Regional Fire Authority (PSRFA).
Estimated Annual
Revenue
Up to the full value of the banked capacity: $6,000,000
Time to Implement Collections begin the year after a new property tax ordinance is passed
Offsetting
Expenditures
None
Implementation
Requirements
• Councilmanic majority vote
• Must pass vote during year prior to expected collections (e.g., ordinance
increasing collections in 2027 must be passed during 2026)
Administrative Effort
Low. This revenue would require staff presentation and Council deliberation at
the Finance and Governance Committee, Committee of the Whole, and the
regular Council meeting.
Peer Usage
The following Cities banked property tax capacity after joining a Regional Fire
Authority. These cities later chose to use some or all this banked property tax
capacity.
• Kent (PSRFA member): 2017
• Kenmore: 2023
• Lynnwood: 2025
• Puyallup: 2025
• Port Townsend: 2021, 2022
The following Cities joined a Regional Fire Authority without reducing
(banking) any of their own property tax capacity.
• Maple Valley (PSRFA member)
• Shoreline: 2025
This list of peers using banked property tax is not exhaustive. This represents
information easily accessible online. There may be others not listed.
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2. Property Tax Banked Capacity
Who Pays
Individuals and businesses that own property in Tukwila pay this tax.
However, some portion of this cost does get passed onto tenants, both
residential and commercial, through rent or lease agreements. The extent to
which this tax increase is passed onto renters varies due to a wide range of
factors, including:2
• Market conditions: The supply and demand for property is a primary
determinant of rental costs. In a tight market with low vacancy rates, such
as those in the greater Seattle area, property owners are generally able to
pass more of their costs, including taxes, onto tenants.
• Jurisdictional competition and tenant mobility: Tenants are mobile,
which means that landlords compete for renters across the larger regional
rental market, not just within jurisdictional boundaries. An increase in
property taxes within one jurisdiction may not significantly shift the market
equilibrium for rental costs, which can limit landlords’ abilities to pass
through property tax costs. Tukwila’s small size reduces the impact of the
City’s property tax changes on the larger regional rental market.
• Proximity to urban centers: Passthrough rates tend to be higher in
areas closer to major metropolitan cores.3 Tukwila’s proximity to Seattle
may increase the likelihood of higher passthrough.
• Public service benefits: Rental demand—tenants’ willingness to pay for
property—is influenced by the degree of perceived public service benefits
received. Landlords can generally passthrough more property tax costs
when the level of public benefits received by renters is perceived as high.
• Type of Lease: Commercial leases often allow for more direct
passthrough of property taxes. Triple Net (NNN) leases, commonly used
in Washington, explicitly require tenants to cover property tax obligations,
resulting in full tax passthrough in many cases.
2 Richard W. England, "Tax Incidence and Rental Housing: A Survey and Critique of Research," National Tax
Journal 69, no. 2 (June 2016): 435-460.
David J. Schwegman and John Yinger, "The Shifting of the Property Tax on Urban Renters: Evidence from New
York State's Homestead Tax Option," CES Working Paper 20-43 (December 2020).
Carroll, Robert J and John Yinger. "Is The Property Tax A Benefit Tax? The Case of Rental Housing." National Tax
Journal (1994): 47(2): 295-316.
Orr, Larry L. “The Incidence of Differential Property Taxes on Urban Housing: Reply.” National Tax Journal 23, no.
2 (1970): 193–198.
When it comes to Seattle's property tax levy, renters are not immune," KUOW, accessed June 2, 2025.
3 Lyndsey A. Rolheiser, "Commercial Property Tax Incidence: Evidence from Urban and Suburban Office Rental
Markets," SSRN, 2019.
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2. Property Tax Banked Capacity
Equity Implications
Property taxes are primarily paid by property owners, who typically have
higher incomes and greater wealth than renters.4 As such, property taxes are
often considered more progressive than other local revenue sources, such as
sales taxes.
However, some of the tax burden may be passed on to tenants through higher
rents, depending on local market conditions and lease structures. This
creates potential equity concerns, especially for lower-income renters who
already face high housing cost burdens. In commercial settings, lease
agreements often allow for more direct passthrough of tax costs, which may
affect small businesses that rent space.
The equity impact also varies within the population of property owners. While
property taxes are based on assessed value, they still represent a larger
share of income for lower-income owners than for those with higher incomes.5
Additionally, systemic issues in property valuation and assessment practices
can lead to uneven burdens across neighborhoods and property types. 6
In general, while property taxes are less regressive than many other local tax
options, they still have nuanced equity implications, particularly when
considering their indirect effects on renters and the distribution of tax burdens
among different types of property owners.
4 Choi, Jung Hyun, and Amalie Zinn. 2024. "The Wealth Gap between Homeowners and Renters Has Reached a
Historic High." Urban Institute, April 19, 2024
5 Institute on Taxation and Economic Policy, "Washington: Who Pays? 7th Edition," ITEP, accessed June 2, 2025
6 Christopher Berry et al., "An Evaluation of Property Tax Regressivity in Seattle and Surrounding King County
(2006 – 2018)," Center for Municipal Finance, Harris School of Public Policy, University of Chicago, July 2020.
34
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3. Property Tax Levy Lid Lift
Description
A property tax levy lid lift is a concept that allows the City to increase their
property tax collections beyond the standard limit set by law, currently 1%.
There are two types of levy lid lifts:
• Single-Year Levy Lid Lift: It allows your jurisdiction to increase the
maximum levy by more than one percent for one year only.
o That amount is then used as a base to calculate all subsequent
1% levy limitations for the duration of the levy.
• Multi-Year Levy Lid Lift: This permits incremental increases over several
years, providing more flexibility for long-term funding needs.
Levy lid lifts are often used to fund essential services like public safety, parks,
or infrastructure improvements. They require voter approval and are
presented as ballot measures during elections.
Estimated Annual
Revenue
In 2025, every $0.10 increase to the levy rate would generate $995,100.
Time to Implement
• Single-year lid lifts may be voted on during any election
• Mutli-year lid lifts must be voted on during a primary or general election
• Election must be held not more than 12 months before levy is made (e.g.,
if vote in 2026, increase effective for 2027 levy).
Offsetting
Expenditures
None
Implementation
Requirements
Requires a vote by residents, pursuant to RCW 84.55.060 and WAC 458-19-
045
Administrative Effort Medium-to-High: financial modeling, council proceedings, resident
communications and outreach
35
22
3. Property Tax Levy Lid Lift
Peer Usage
Single-Year Levy Lid Lifts:
• Arlington: 2014
• Bellevue: 2016, 2022
• Bothell: 2016
• Duvall: 2016
• Kirkland: 2012, 2020
• Mercer Island: 2012, 2022
• Snoqualmie: 2012, 2016
• University Place: 2023
Multi-Year Levy Lid Lifts:
• Bothell: 2018
• Maple Valley: 2023
• Medina: 2019
• Mountlake Terrace: 2016
• Normandy Park: 2016, 2021
• Shoreline: 2016, 2022
Who Pays Property owners and property renters. See Property Tax Banked Capacity
above for a detailed analysis of who pays this tax.
Equity Implications See Property Tax Banked Capacity above for a detailed analysis of the equity
implications of property taxes.
Other Considerations Property tax banked capacity must be fully used before a levy lid lift should be
considered.
36
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Current Sales Tax Overview
By law, Cities must remit 15% of their 0.5% First Half and 0.5% Second Half sales taxes to their Counties. Additionally, the state
Department of Revenue charges a 1% processing fee for collecting sales taxes. Therefore, Tukwila’s true percentage of sales received
through its sales tax is 0.8415% [99% of 85% of 1%; 99%*85%*(0.5%+0.5%)].
County -
Region City
Aggregate
Sales Tax
Rate
City
Sales
Tax
Total
City Sales Tax Components
County
Total
Transit
District State First
Half
Second
Half
Public
Safety
Transport.
Benefit
District
Housing &
Related
Services1
City Criminal
Justice -
NEW2
King Tukwila 10.2% 1.0% 0.5% 0.5% 1.3% 1.4% 6.5%
King - Nearest Auburn 10.3% 1.1% 0.5% 0.5% 0.1% 1.3% 1.4% 6.5%
King - Nearest Burien 10.2% 1.0% 0.5% 0.5% 1.3% 1.4% 6.5%
King - Nearest Des Moines 10.2% 1.0% 0.5% 0.5% 1.3% 1.4% 6.5%
King - Nearest Kent 10.2% 1.1% 0.5% 0.5% 0.1% 1.2% 1.4% 6.5%
King - Nearest Newcastle 10.2% 1.0% 0.5% 0.5% 1.3% 1.4% 6.5%
King - Nearest Renton 10.3% 1.2% 0.5% 0.5% 0.1% 0.1% 1.2% 1.4% 6.5%
King - Nearest SeaTac 10.2% 1.0% 0.5% 0.5% 1.3% 1.4% 6.5%
King - Nearest Seattle 10.35% 1.15% 0.5% 0.5% 0.15% 1.3% 1.4% 6.5%
King Bellevue 10.2% 1.1% 0.5% 0.5% 0.1% 1.3% 1.4% 6.5%
King Federal Way 10.2% 1.0% 0.5% 0.5% 1.3% 1.4% 6.5%
King Issaquah 10.3% 1.2% 0.5% 0.5% 0.1% 0.1% 1.2% 1.4% 6.5%
King Kenmore 10.2% 1.0% 0.5% 0.5% 1.3% 1.4% 6.5%
King Kirkland 10.3% 1.1% 0.5% 0.5% 0.1% 1.3% 1.4% 6.5%
King Woodinville 10.2% 1.0% 0.5% 0.5% 1.3% 1.4% 6.5%
Pierce Edgewood 10.1% 1.0% 0.5% 0.5% 0.6% 2.0% 6.5%
Pierce Fife 10.1% 1.0% 0.5% 0.5% 0.6% 2.0% 6.5%
Snohomish Edmonds 10.5% 1.0% 0.5% 0.5% 0.4% 2.6% 6.5%
Snohomish Lynnwood 10.6% 1.1% 0.5% 0.5% 0.1% 0.4% 2.6% 6.5%
Snohomish Mountlake Terrace 10.5% 1.0% 0.5% 0.5% 0.4% 2.6% 6.5%
Snohomish Mukilteo 10.6% 1.1% 0.5% 0.5% 0.1% 0.4% 2.6% 6.5%
Notes:
1Cities can only impose this sales tax component if their County has not already imposed such a tax. The three Cities listed a bove implemented these sales taxes prior to their counties implementing
this tax, so they are grandfathered into keeping it. All other Cities listed, however, are barred from implementing this sales tax.
2This new sales tax was passed into law (HB2015) in June 2025, so no Cities have yet to implement this tax. 37
24
4. Sales Tax: Transportation Benefit District
4A: Councilmanic 4B: Ballot Measure
Description
A Transportation Benefit District (TBD) is a dedicated local funding source
used for transportation projects such as road maintenance, bridge
improvements, traffic management, pedestrian improvements, and transit-
supportive infrastructure. Revenue would come from either a 0.1%
councilmanic sales tax or a higher rate with optional car tabs if pursued via
ballot measure. A TBD can be drawn for only a certain area of the City,
restricting sales tax collections to within that area. The whole City could be a
TBD or just a section of it, like the Southcenter district.
Estimated Annual
Revenue
• $2,791,000 at 0.1% sales tax (councilmanic action)
• $8,375,000/year at 0.3% sales tax (ballot measure)
Time to Implement • 6 to 12 months (0.1% councilmanic sales tax)
• 12 to 24 months (0.3% sales tax via ballot measure)
Offsetting
Expenditures
• ~$50,000 one-time administrative startup (creation of TBD, public notice,
finance/accounting updates)
• ~$25,000/year ongoing administration if separately accounted and
reported
Implementation
Requirements
• 0.1% sales tax: Councilmanic vote with public hearing and 10-day notice
• 0.3% sales tax or Vehicle License Fees above $50: Voter-approved ballot
measure
• Sales tax increase through councilmanic authority limited to 0.1%
• Sales tax increase up to 0.3% requires voter approval
• Vehicle license fees: $20–$40 councilmanic; up to $100 with voter
approval
Administrative Effort
Moderate effort required, including:
• Creating the district
• Amending City Code
• Financial tracking for TBD funds
• Public outreach and education (especially for ballot measure)
38
25
4. Sales Tax: Transportation Benefit District
4A: Councilmanic 4B: Ballot Measure
Peer Usage
• Renton (0.1% TBD sales tax)
• Auburn (0.1% TBD sales tax)
• Burien ($20 vehicle tab fee)
• Seattle (0.15% sales tax + $40 vehicle tabs)
Who Pays
• Primarily consumers purchasing goods in Tukwila (especially
visitors/shoppers at Westfield Southcenter)
• Sales tax generally has a smaller impact on Tukwila residents compared
to vehicle license fees
Equity Implications
• Sales tax is generally more equitable than vehicle license fees.
• Sales taxes are regressive, but because Tukwila is a regional retail hub
(Westfield Southcenter), a large portion of sales tax revenue would be
paid by non-residents.
• The boundary could be drawn for the TBD to only include the regional
center, such as the Southcenter District.
• Vehicle license fees would fall heavily on Tukwila households regardless
of income.
Other Considerations
• A TBD would significantly help the City meet its Transportation
Improvement Plan (TIP) funding needs.
• Early implementation would allow Tukwila to leverage matching funds
from federal, state, and regional grants tied to transportation projects.
• At 0.1% sales tax, a TBD would pay for 75% of Street Maintenance’s
annual operating expenses, relieving the General Fund of almost $3
million annually.
• A 0.1% sales tax would not materially affect competitiveness. Current
cumulative (all governments) sales tax rates:
o Tukwila: 10.2%
o Bellevue: 10.2%
o Seattle: 10.35%
o Lynnwood (Alderwood Mall): 10.6%
39
26
5. Sales Tax: Criminal Justice (HB2015, New Authority)
Description
• Beginning July 27, 2025, Cities and Counties may impose a new 0.1%
sales and use tax dedicated to criminal justice purposes
• Revenue must be used for broadly defined criminal justice purposes,
including:
o Law enforcement staffing and training
o Mental health crisis response and co-response teams
o Diversion and reentry programs
o Domestic violence and victim services
• Public safety and criminal justice functions make up a plurality of City
General Fund expenses, providing a wide range of eligible uses for this
revenue
• Meeting the eligibility criteria, verifying compliance with the Criminal
Justice Training Commission (CJTC), and then adopting this tax (and/or
the Public Safety Sales Tax) would qualify the City to apply for the Local
Law Enforcement Grant Program, potentially unlocking significant
additional funding
Estimated Annual
Revenue
• $2,791,000, plus potential additional revenues through the Local Law
Enforcement grant program
Time to Implement
• 6 to 12 months, assuming grant eligibility is met and verified by the CJTC
• May require a longer timeline if eligibility deficiencies are identified and
must be resolved
Offsetting
Expenditures
• None, unless penalties are triggered for non-compliance
• If the City does not meet CJTC requirements within 180 days of first
submission, the state will withhold $100,000 per month until compliance is
achieved
40
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5. Sales Tax: Criminal Justice (HB2015, New Authority)
Implementation
Requirements
• May be imposed by Council vote from July 27, 2025, through June 30,
2028
• After June 30, 2028, the tax may only be adopted via ballot measure
• Cities may not adopt this tax if its voters rejected a ballot measure
imposing a public safety or criminal justice tax within the past 12 months.
This currently does not apply to Tukwila.
• The City must meet all Criteria for the Local Law Enforcement Grant
Program, including:
o Crisis intervention and trauma-informed training compliance
o CJTC and Attorney General’s Office (AG) policy adoption (use of
force, de-escalation, domestic violence, etc.)
o Established policies that comply with state law and AG guidance
for practices related to citizenship status
o CJTC trainings related to behavioral health and first aid
o Compliance with state law on use of force data reporting
o Established policies related to civil protection orders and the court-
ordered surrender of firearms
o 100% completion by required officers for CJTC trainings on sexual
assault and gender-based violence
o Established policies for supervising agency volunteers, insignia
worn by volunteers, and for restricting those volunteers from
enforcing criminal laws, using force, carrying weapons, or using
dogs for purposes other than search and rescue
o Staffing plan and data reporting on response/case closure rates
• Formal documentation must be submitted to the CJTC, which must verify
compliance before tax collection can begin
Administrative Effort
Moderate effort required, including:
• Significant effort required to compile and maintain policy compliance
documentation for CJTC
• Annual reporting to Association of Washington Cities on use of funds
• Standard financial tracking procedures once implemented
41
28
5. Sales Tax: Criminal Justice (HB2015, New Authority)
Peer Usage
• King County is actively pursuing implementation
• Other cities may follow, but as of July 2025, this is a brand-new taxing
authority and few, if any, peers have implemented it yet
Who Pays • Consumers purchasing goods in Tukwila, including non-resident visitors
and shoppers at Westfield Southcenter
Equity Implications
• Regressive, as with other sales taxes, lower-income households pay a
higher share of income
• However, Tukwila’s retail base draws large non-resident spending, helping
to export a share of the tax burden
• Revenue must fund criminal justice-related programs that may improve
equity outcomes (e.g., mental health crisis response)
Other Considerations
• Because this tax cannot be imposed if a public safety or criminal justice
tax was recently rejected by voters, the timing and sequencing of sales
tax adoption should be carefully considered if both this tax and Revenue
Option 6. Public Safety Sales Tax (RCW 82.14.450) are being evaluated.
• Implementation requires careful coordination between City departments
(Police, Legal, Finance, Mayor’s Office) for documentation and reporting
• Unlike the Public Safety Sales Tax (RCW 82.14.450), there is no revenue
sharing with the County. 100% of this revenue is retained by the City
• The Local Law Enforcement Grant Program ends June 30, 2028. Early
implementation of this tax increases the likelihood and degree of potential
grant funds received.
42
29
6. Sales Tax: Public Safety (RCW 82.14.450)
Description
• An additional sales tax up to 0.1%
• 15% of these revenues are shared with the County. Tukwila retains 85%.
• Revenues are partially restricted: 1/3 must be used for criminal justice
and/or fire protection
• If the City implements the tax prior to King County, then the City would be
able to collect the tax in perpetuity.
• However, if King County implements a similar tax at its maximum rate
prior to the City of Tukwila, then the City will never be able to
implement such a tax.
Estimated Annual
Revenue
$2,370,000
Plus potential Local Law Enforcement Grant Program Funds, if in compliance
with the CJTC requirements delineated in Revenue Option 5. Sales Tax:
Criminal Justice (HB2015, New Authority)
Time to Implement After approval in a primary or general election
Offsetting
Expenditures None
Implementation
Requirements
• Detailed in RCW 82.14.450
• Voter-approved
• The sales tax may only be submitted at a primary or general election; it
may not appear in any February or April special election.
• Motor vehicle sales and the first 36 months of motor vehicle leases are
exempt
Administrative Effort
Moderate effort required, including:
• Amending City Code
• Public outreach and education (especially for a ballot measure)
• Financial tracking for these funds
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30
6. Sales Tax: Public Safety (RCW 82.14.450)
Peer Usage
26 Cities in Washington have a 0.1% public safety sales tax, including:
• Kirkland
• North Bend
• Snoqualmie
• Gig Harbor
• Roy
• Marysville
• Mill Creek
• Monroe
Who Pays Primarily consumers purchasing goods in Tukwila, especially
visitors/shoppers at Westfield Southcenter
Equity Implications
Sales taxes are regressive, but because Tukwila is a regional retail hub
(Southcenter Mall), a large portion of sales tax revenue would be paid by non-
residents.
Other Considerations
• Because Police, Municipal Court, and Fire represent over 45% General
Fund expenses, both the restricted and unrestricted portions of this sales
tax will greatly help the City’s overall bottom line.
• See Sales Tax Overview to examine how increasing sales tax would affect
competitiveness with other jurisdictions.
• If the City of Tukwila imposes this tax prior to the County, then Tukwila can
retain this tax authority in perpetuity. However, if the County imposes its
maximum rate of 0.3% and the City of Tukwila has not previously imposed
a Public Safety Sales Tax, then Tukwila will never be able to implement
such a sales tax. This would permanently reduce the City’s revenue
potential by millions of dollars. See Scenario Analysis on next page.
• If voters were to reject this ballot measure prior to the City implementing
the new Criminal Justice Sales Tax (Revenue Option #5), then the City
would be barred from implementing the Criminal Justice Sales Tax for 12
months.
44
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6. Public Safety Sales Tax (RCW 82.14.450): Scenario Analysis of King County Public Safety
Sales Tax Implementation
The combined rate of Public Safety Sales Tax rates (strictly through RCW 82.14.450, HB2015 sales tax is not included) for King
County and Tukwila cannot exceed 0.30%. If the County implements a 0.30% sales tax (leftmost column) prior to Tukwila
implementing a 0.10% tax, then Tukwila cannot implement such a tax. This results in an estimated $1.9 million of foregone
revenue each year (rightmost column).
If Tukwila implements a 0.10% public safety sales tax prior to King County, then the County’s maximum public safety sales tax
rate in Tukwila would be 0.20%. Regardless of King County’s decisions, Tukwila could keep this 0.10% sales tax in perpetuity.
County
Tax Rate
Scenario 1: Tukwila Implements Prior to King
County Scenario 2: Tukwila Does Not Implement Prior to King County
Tukwila
Tax
Revenue
County Revenue
Shared with
Tukwila
Total Tukwila
Revenue
Tukwila Tax
Revenue
County Revenue
Shared with
Tukwila
Total Tukwila
Revenue
Permanent Annual
Lost Revenue By
Not Implementing
Before the County
0.10% $2,370,000 $480,000 $2,850,000 $0, But City Can
Implement Later $480,000 $480,000 N/A
0.20% $2,370,000 $960,000 $3,330,000 $0, But City Can
Implement Later $960,000 $960,000 N/A
0.30% $2,370,000
County Cannot
Impose Tax at this
Rate in Tukwila
$3,330,000
Tukwila can never
impose 0.1% Public
Safety Sales Tax
$1,440,000 $1,440,000 $1,890,000
County shared revenue is distributed proportionally to population, so would move up or down depending on Tukwila’s rate of
resident growth compared to the resident growth within the rest of the County. From 2010-2023, Tukwila’s rate of growth was 7%
less than the rest of the County. If this trend continues, then the County revenue shared with Tukwila will decline over time.
If the City imposes its own sales tax, however, revenue growth will correlate with sales growth that occurs within the City. Over
the past 10 years, sales have steadily grown over time.45
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7A. Admissions Tax Changes: Nonprofits
Description Eliminate the admissions tax exemption for nonprofit organizations
Estimated Annual
Revenue
$557,000
Time to Implement Five months
Offsetting
Expenditures
Minimal
Implementation
Requirements
Remove the admissions tax exemption for nonprofit organizations in TMC
3.20.025(A)(1)
Administrative Effort
The administrative effort is low. The City will need to complete the following
tasks to eliminate the exemption:
• Amend TMC 3.20.025
• Update public guidance on the City’s website
• Provide timely advanced notice to impacted taxpayers
Peer Usage
Auburn, Burien, and Kent provide an admissions tax exemption for nonprofit
organizations. Seattle provides an admissions tax exemption to select
nonprofit organizations or events, but it is not a blanket exemption. Renton
does not provide any similar nonprofit exemption.
Who Pays The admissions tax is paid by consumers.
Equity Implications This revenue option is regressive, as lower-income individuals pay a larger
percentage of their income in taxes.
Other Considerations
The number of organizations that would be impacted by this change is not
known. The revenue estimate provided is based on the limited information
currently available.
46
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7B. Admissions Tax Changes: Bowling
Description Eliminate the admissions tax exemption for bowling and related equipment
rental
Estimated Annual
Revenue
$70,000
Time to Implement Five months
Offsetting
Expenditures
Minimal
Implementation
Requirements
Remove the admissions tax exemption in TMC 3.20.025(A)(2)
Administrative Effort
The administrative effort is low. The City will need to complete the following
tasks in order to eliminate the exemption:
• Amend TMC 3.20.025
• Update public guidance on the City’s website
• Provide timely advanced notice to impacted taxpayers
Peer Usage
Bowling activities are exempt from admissions tax in Seattle, Burien, and
Kent. While other neighboring cities do not provide such an exemption,
available information indicates that there aren’t any bowling facilities currently
present in those cities (e.g. Auburn, Renton).
Who Pays The admissions tax is paid by consumers.
Equity Implications This revenue option is regressive, as lower-income individuals pay a larger
percentage of their income in taxes.
47
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7C. Admissions Tax Changes: Foster Golf Course
Description Eliminate the admissions tax exemption for the Foster Golf Course
Estimated Annual
Revenue
$90,000
Time to Implement Five months
Offsetting
Expenditures
Minimal
Implementation
Requirements
Remove the admissions tax exemption in TMC 3.20.025(A)(3)
Administrative Effort
The administrative effort is low. The City will need to complete the following
tasks in order to eliminate the exemption:
• Amend TMC 3.20.025
• Update public guidance on the City’s website
• Provide timely advanced notice to the Foster Golf Course
Peer Usage
Neighboring cities charge admissions tax at the same rate as the City, which
applies to activities such as those conducted by the Foster Golf Course that
would become subject to tax.
Who Pays The admissions tax is paid by consumers.
Equity Implications This revenue option is regressive, as lower-income individuals pay a larger
percentage of their income in taxes.
Other Considerations
If this exemption is removed, admissions tax revenues collected by the Foster
Golf Course will be allocated to the Foster Golf Link Fund until legislative
action is taken to reallocate such revenues to the General Fund, in
accordance with TMC 3.20.025(A)(3).
48
35
8. Gambling Tax Changes
Description
Increase the Tukwila Gambling tax rate for Public Card Rooms/Social Card
Games.
Tukwila’s current policy is as follows:
• 11% if the City has 5 or fewer card rooms (current rate)
• 15% if the City has 6 card rooms
• 20% if the City has more than 6 card rooms
Estimated Annual
Revenue
$400,000 for each 1% increase in the Gambling tax for Public Card
Rooms/Social Card Games
Time to Implement Five months
Offsetting Expenditures None
Implementation
Requirements
• Amend the tax rate in TMC 3.08.030
• Follow the regulations set forth in RCW 9.46.110
Administrative Effort
Administrative effort is low. The City will need to complete the following tasks
to implement the new tax rate:
• Amend TMC 3.08.030.
• Update the Gambling tax return form and public guidance
• Provide timely advanced notice to impacted taxpayers
Peer Usage
Current Gambling tax card room rates of neighboring cities:
• Renton: 10% Gross Receipts
• Kent: 11% Gross Receipts
• Burien: 11% Gross Receipts
• Federal Way: 10% Gross Receipts
• Auburn: 4% Gross Receipts
Who Pays Local casinos pay the Gambling Tax
Equity Implications The tax is proportional as it is based on a percentage of gross revenue.
Other Considerations
The City’s current tax rate is at the high end of its peer cities. Setting the tax
rate too high could cause casinos to relocate to nearby cities with lower
rates, resulting in lost revenue. Any rate increases should ensure Tukwila
remains competitive with nearby jurisdictions.
49
36
9. Interfund Utility Tax Changes
Description
Interfund utility taxes are internal charges levied on City-owned utilities
(Water, Sewer, Surface Water) based on their revenue. These taxes are
transferred to the General Fund and support citywide services such as public
safety, human services, and parks. Increasing the tax rate from the current
10% to 11% (or higher) would provide an ongoing boost to General Fund
revenues without requiring voter approval.
Estimated Annual
Revenue
$295,000 per 1% increase
Time to Implement 6 to 9 months
Offsetting
Expenditures
Minimal
Implementation
Requirements
• No legal cap for interfund utility tax rates under RCW 35.22.280
• Tukwila Municipal Code (TMC 3.54) currently authorizes a 10.0% rate
through December 31, 2027
• Historical rate has ranged from 10% to 15% in prior years
• Ordinance amendment would be needed to raise the rate beyond 10.0%
Administrative Effort
• Low
• Finance already conducts monthly interfund transfers. Rate updates
would require minor accounting and budget adjustments.
• Likely administrative efforts include financial modeling, Council
deliberation, ordinance adoption, and implementation
Peer Usage
• Seattle, Tacoma, and Renton all apply internal utility taxes from city-run
utilities to support their General Funds
• Tukwila’s current 10% rate is moderate and consistent with local peers
o Seattle: 11.5% to 15.5%, depending on utility
o Tacoma: 8%
o Auburn: 11.5%
o Kirkland: 10.5%
Who Pays Utility customers (residents, businesses, and government agencies), as costs
are recovered through rates
50
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9. Interfund Utility Tax Changes
Equity Implications
Like many other revenue options, this tax is regressive. Because utility taxes
are flat percentages of bills, they take a higher share of income from lower-
income households. Mitigation strategies include targeted utility assistance or
low-income rate discounts.
Other Considerations
• We currently tax other franchise utilities operating in our ROW at 6%
• Our internal utility tax gross total would increase further if utility rates
increase.
51
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10. Increase Franchise Fees for External Water and Sewer Districts
Description
Franchise fees are charges the City imposes on utilities for the right to
operate within and use public rights-of-way (ROW). Tukwila currently charges
a 6% franchise fee on gross revenues earned within city limits by three
external public utility providers: Water District 125, Highline Water District, and
Valley View Sewer District. This proposal increases those fees to 10%,
aligning with our internal tax.
Estimated Annual
Revenue
$280,000 in 2025, growing to over $317,000 by 2029 in additional General
Fund revenue across the three districts
Time to Implement 12 months
Offsetting
Expenditures
$5,000–$10,000 in staff/legal time for negotiation and ordinance amendments
Implementation
Requirements
Councilmanic vote; typically requires a majority vote of the City Council to
adopt or adjust the fee.
RCW 35A.47.040 – Franchise authority
RCW 35.21.860 – Franchise fee requirements
Administrative Effort
• Moderate
• Staff/legal time for outreach, negotiations, and drafting amended
agreements
Peer Usage
• Bellevue, Kent, Seattle, and other cities charge 8% to 12% franchise fees
on external water, sewer, or cable utilities
• Tukwila’s current 6% is below the low end of the regional range
• We charge our own utilities 10%
Who Pays Customers of the utility districts (residential and commercial ratepayers); utility
districts may absorb or pass on the increased cost through rates
Equity Implications
Franchise fees are embedded in water and sewer bills and are mildly
regressive, though the proposed increase (~4%) is small relative to total bills.
Low-income residents could be affected if districts pass the full cost on.
Mitigation would need to come through the utilities’ own assistance programs.
Other Considerations External districts may resist or request delayed implementation
52
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11. Permitting Cannabis Sales
Description
Marijuana producers, processors, and retailers are allowed in HI, TVS, and
TSO Zoning Districts and 3 licenses have been allocated to Tukwila by the
State Liquor and Cannabis Board (LCB). No such uses are currently
operating in the City but the uses could be permitted in additional zones such
as RCM and TUC to increase opportunity.
Note: This revenue option is currently on a parallel track. The City Council
has asked that staff provide options for expanding the areas available for
cannabis retail in the City. The Planning and Community Development
Committee (PCD) will begin to discuss this issue in July 2025.
Estimated Annual
Revenue
$250,000 from cannabis excise tax, sales tax, and B&O tax for 3 retail
locations, and $38,000 current per capita distribution from LCB
Time to Implement
4 months to draft an ordinance, perform SEPA review, provide a draft for the
Department of Commerce review, hold a public hearing and adopt code
changes.
Offsetting
Expenditures
Cannabis stores are frequent targets for theft, typically in the form of armed
robberies or smash and grab burglaries. This may lead to increased public
safety expenditures.
Implementation
Requirements
Expanding cannabis uses into more retail friendly zones. Determining whether
there should be any specific requirements for this use such as bollards to
protect the building or private security. Deciding whether to reduce any buffer
distances from child-oriented uses to increase available locations.
Administrative Effort Depending on the level of public outreach desired for the ordinance, staff
effort would range from low to medium.
Peer Usage
Local dispensaries generated the following excise tax distributions in 2024:
• Auburn: 4 sites ($238,000)
• Des Moines: 2 sites ($135,000)
• Covington: 2 sites ($107,000)
• Burien: 2 sites ($164,000)
• Renton: 4 sites ($300,000)
Who Pays Recreational cannabis purchasers pay the 37% excise tax in addition to sales
tax. Businesses pay Tukwila’s B&O tax.
Equity Implications A third cannabis retail license was granted in Tukwila by LCB as part of the
social equity effort per E2SHB 2870 and SB 5080.
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Other Considerations
The state cannabis excise tax and its distribution has changed over time and
can be altered in any future legislative session, thereby altering the revenue
received.
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12A. External Utility Taxes: Electricity
Description Increase the utility tax rate on electricity services
Estimated Annual
Revenue
$317,000 for each 1% increase in the rate of tax
Time to Implement Twelve months
Offsetting
Expenditures
None
Implementation
Requirements
• Obtain voter approval to increase the tax rate, per RCW 35.21.870
• If approved by the majority of voters, amend TMC 3.50.040(1).
Administrative Effort
The City will need to complete the following tasks to implement the new tax
rate:
• Obtain approval from the majority of voters
• Amend TMC 3.50.040(1)
• Update the utility tax return form and public guidance
• Send timely advanced notice to impacted taxpayers
Peer Usage
Neighboring cities levy a utility tax on electricity services at a rate of six
percent, except SeaTac, which does not impose utility taxes.
In comparison, the City’s tax current rate is six percent.
Who Pays
While the utility tax is paid by the business that is providing electricity
services, the cost of the tax is passed on to the consumer by the business.
The effective rate is slightly higher than the tax rate.
Equity Implications
The tax is regressive. The cost of the tax is passed on by the business to the
consumer, with lower-income individuals paying a larger percentage of their
income in taxes.
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12B. External Utility Taxes: Solid Waste
Description Increase the utility tax rate on solid waste services
Estimated Annual
Revenue
$138,000 for each 1% increase in the rate of tax. Of this amount, $52,000
would be allocated to the General Fund, with the remainder dedicated to road
maintenance and road-related projects.
Time to Implement Five months
Offsetting
Expenditures
None
Implementation
Requirements
Amend TMC 3.51.040
Administrative Effort
The administrative effort is low. The City will need to complete the following
tasks to implement the new tax rate:
• Amend TMC 3.51.040
• Update the utility tax return form and public guidance
• Send timely advanced notice to impacted taxpayers
Peer Usage
The City’s current tax rate is 16 percent. Neighboring cities levy a utility tax on
solid waste services at the following rates.
• Seattle – 14.2 percent
• Kent – 18.4 percent
• Renton – 6.8 percent
• Burien – 6 percent
• Auburn – 11.5 percent
• SeaTac – does not impose utility taxes
Who Pays
While the utility tax is paid by the business that is providing solid waste
services, the cost of the tax is passed on to the consumer by the business.
The effective rate is slightly higher than the tax rate.
Equity Implications
The tax is regressive. The cost of the tax is passed on by the business to the
consumer, with lower-income individuals paying a larger percentage of their
income in taxes.
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12B. External Utility Taxes: Solid Waste
Other Considerations
• The solid waste utility tax only applies to nonresidential customers.
Residential solid waste pickup services are exempt from the tax.
• TMC 3.51.020 could be amended to allow any increases in the rate of tax
to be allocated entirely to the general fund. Currently, 37.5% of the solid
waste utility tax revenue is allocated to the general fund, with the
remainder allocated to a dedicated fund for road maintenance.
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12C. External Utility Taxes: Telephone
Description Increase the utility tax rate on telephone services
Estimated Annual
Revenue
$113,000 for each 1% increase in the rate of tax
Time to Implement Twelve months
Offsetting
Expenditures
None
Implementation
Requirements
• Obtain voter approval to increase the tax rate, per RCW 35.21.870
• If approved by the majority of voters, amend TMC 3.50.040(3).
Administrative Effort
The City will need to complete the following tasks in order to implement the
new tax rate:
• Obtain approval from the majority of voters
• Amend TMC 3.50.040(3)
• Update the utility tax return form and public guidance.
• Send timely advanced notice to impacted taxpayers
Peer Usage
• Neighboring cities levy a utility tax on telephone services at a rate of six
percent, except SeaTac, which does not impose utility taxes.
• In comparison, the City’s tax current rate is six percent.
Who Pays
While the utility tax is paid by the business that is providing telephone
services, the cost of the tax is passed on to the consumer by the business.
The effective rate is slightly higher than the tax rate.
Equity Implications
The tax is regressive. The cost of the tax is passed on by the business to the
consumer, with lower-income individuals paying a larger percentage of their
income in taxes.
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12D. External Utility Taxes: Natural/Manufactured Gas
Description Increase the utility tax rate on natural/manufactured gas services
Estimated Annual
Revenue
$126,000 for each 1% percent increase in the rate of tax
Time to Implement Twelve months
Offsetting
Expenditures
None
Implementation
Requirements
• Obtain voter approval to increase the tax rate, per RCW 35.21.870
• If approved by the majority of voters, amend TMC 3.50.040(2).
Administrative Effort
The City will need to complete the following tasks in order to implement the
new tax rate:
• Obtain approval from the majority of voters
• Amend TMC 3.50.040(2)
• Update the utility tax return form and public guidance
• Send timely advanced notice to impacted taxpayers
Peer Usage
Neighboring cities levy a utility tax on gas services at a rate of six percent,
except SeaTac, which does not impose utility taxes.
In comparison, the City’s tax current rate is six percent.
Who Pays
While the utility tax is paid by the business that is providing gas services, the
cost of the tax is passed on to the consumer by the business. The effective
rate is slightly higher than the tax rate.
Equity Implications
The tax is regressive. The cost of the tax is passed on by the business to the
consumer, with lower-income individuals paying a larger percentage of their
income in taxes.
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12E. External Utility Taxes: Cable TV
Description Increase the utility tax rate on cable television services
Estimated Annual
Revenue
$28,000 for each 1% increase in the rate of tax, with an anticipated decrease
of approximately 10% annually
Time to Implement Five months
Offsetting
Expenditures
None
Implementation
Requirements
Amend TMC 3.50.040(4)
Administrative Effort
The administrative effort is low. The City will need to complete the following
tasks to implement the new tax rate:
• Amend TMC 3.50.040(4)
• Update the utility tax return form and public guidance
• Send timely advanced notice to impacted taxpayers
Peer Usage
The City’s current tax rate is six percent. Neighboring cities levy a utility tax on
cable television services at the following rates.
• Seattle: 10%
• Auburn, Burien, Kent, Renton: 6%
• SeaTac: No utility taxes
Who Pays
While the utility tax is paid by the business that is providing cable TV services,
the cost of the tax is passed on to the consumer by the business. The
effective rate is slightly higher than the tax rate.
Equity Implications
The tax is regressive. The cost of the tax is passed on by the business to the
consumer, with lower-income individuals paying a larger percentage of their
income in taxes.
Other Considerations Cable television utility tax revenue has been consistently declining due to a
consumer shift away from cable TV to streaming services
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13. Burglary Alarm Permits
Description
Requiring monitored burglary/panic alarms to be registered/permitted would
bring in permitting revenue and increase collection rate for the existing false
alarm program. This effort includes introduction of a late payment fee for false
alarm invoices.
Suggested fees for program:
• Initial residential alarm registration: $25
• Initial commercial alarm registration: $100
• All annual registration renewals: $15 per year
• Unregistered alarm fee: $50 per false alarm incident
• Late payment fee: $25
Estimated Annual
Revenue
$81,000 per year:
• $36,000 in permitting
• $45,000 in increased collection rate on false alarm invoices
Time to Implement Four months
Offsetting
Expenditures
Minimal. There would need to be awareness campaigns, which would include
basic communications materials such as door hangers that officers would
leave behind while checking alarms or leaflets inside utility bills.
Implementation
Requirements
Amend TMC Chapter 8.08 False Alarms to include alarm registration
requirement and to set fees.
Administrative Effort
Efforts would include a media campaign to raise awareness of new
requirements, working with current false alarm partner CryWolf to establish
and implement registration requirements, fielding questions/calls from
community.
Peer Usage
• Renton: $25 for initial registration only; $50 failure to register fee; $25 late
payment fee
• Auburn: $24 annually; $200 failure to register fee; $25 late payment fee
• Kent: No registration/permitting, limited alarm response
• Federal Way: $25 annually; $50 failure to register fee; $25 late payment
fee
• Des Moines: $25 annually; $200 failure to register fee; $25 late payment
fee
Who Pays Person/Business to whom the alarm is registered.
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13. Burglary Alarm Permits
Equity Implications
Since our current false alarm program was implemented in 2023, 94% of
billable alarms are attributable to commercial locations, residents would be
minimally impacted.
Other Considerations
A different model to consider would be similar to Seattle and Tacom: they
charge the registration and false alarm fees to the alarm monitoring
companies. It’s then up to each company to recover the fees from the
individual alarm owners.
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14. Parking Tax Changes
Description Increase the commercial parking tax rate. The City’s current tax rate is 15% of
commercial parking charges.
Estimated Annual
Revenue
$53,000 for each 1% percent increase in the rate of tax
Time to Implement Five months
Offsetting
Expenditures
None
Implementation
Requirements
Amend the tax rate in TMC 3.48.030
Administrative Effort
The administrative effort is low. The City will need to complete the following
tasks in order to implement the new tax rate:
• Amend TMC 3.48.030
• Update the parking tax return form and public guidance
• Provide timely advanced notice to impacted taxpayers
Peer Usage
The following neighboring cities impose a commercial parking tax.
• Burien: $3.91 per transaction (flat fee)
• SeaTac: $4.13 per transaction (flat fee)
• Seattle: 14.5% of commercial parking charges
Who Pays The tax is paid by consumers on commercial parking transactions.
Equity Implications This revenue option is regressive, as lower-income individuals pay a larger
percentage of their income in taxes.
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15. Indirect Cost Recovery for Grants
Description
Indirect costs, sometimes called overhead costs, are City costs incurred for a
common purpose and not directly connected to a specific project or grant.
Some examples include payroll, City insurance, office furnishings, technology,
and utility services. Having an indirect cost recovery plan allows the City to
identify actual costs of services, relieve pressure on the General Fund, and
get reimbursed for allowable overhead costs from federal and state grants.
The City consistently receives state and federal grant funding with the option
to include an indirect cost rate.
Estimated Annual
Revenue
$40,000
Time to Implement Twelve months
Offsetting
Expenditures
None
Implementation
Requirements
Setting up a Negotiated Indirect Cost Rate Agreement (NICRA):
1. Prepare a cost allocation plan and a comprehensive indirect cost rate
proposal (ICRP) in accordance with 2 CFR Part 200. (Currently in
progress, City Contract No. 25-057)
2. Identify the City’s cognizant federal agency (the agency providing the
most federal funding).
3. Submit ICRP to the City’s cognizant agency.
Recovering Indirect Costs:
4. Include a line item for indirect costs in grant budget proposal.
5. If awarded, submit backup documentation to the granting agency to
support indirect cost rate.
6. Request reimbursement for indirect costs up to the budgeted amount,
based on the amount of direct staff time billed to the grant (Project
Management, Grant Management)
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15. Indirect Cost Recovery for Grants
Administrative Effort
There is medium-to-high initial administrative effort needed to establish the
NICRA, which includes the existing contract underway to establish a revised
indirect cost allocation plan (Contract No. 25-057), along with significant staff
time. There will also be some additional administrative effort to maintain
internal service funds in alignment with this agreement.
However, once in place, there is minimal administrative effort to collect this
revenue. Staff applying for grants will need to include a line item for indirect
costs and submit backup documentation to the granting agency. When
reimbursements are received, Accounts Receivable will need to accurately
code direct revenue to the project/program separate from indirect revenue.
Peer Usage
Other cities in Washington who have indirect cost allocations include
Bremerton, Arlington, Poulsbo, Monroe, Vancouver, Walla Walla, Everett, and
Bainbridge Island.
Who Pays The funding agency awarding the grant
Equity Implications None
Other Considerations
The City’s maintains four internal service funds: Fleet, Self-Insured
Healthcare, LEOFF I Retiree Self-Insured Healthcare, and Firemen’s Pension.
Federal Regulations (2 CFR Part 200, Appendix V) require internal service
funds to have a maximum of “60 calendar days cash expenses for normal
operating purposes.” This essentially means the fund balance in these funds
must be less than 1/6th of regular annual expenditures. This requirement is
achievable, but will require staff to analyze current practices, re-establish
existing procedures, and create new procedures to ensure this requirement is
consistently met. Without strict adherence to this requirement, the City risks
having to return some of these indirect funds to the federal government.
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Appendix A: Potential Variance and Ramp-Up in Revenue
Collection
The revenue numbers listed in the body of this report are presented as point estimates: single
numbers used to approximate the best guess for what these revenues might be. This simplicity
makes revenue options easier to understand and to compare to one another. When forecasting
revenues, however, there are two important factors that must be kept in mind:
1. Variance and Uncertainty: Revenues are affected by a wide range of economic factors.
Even for established revenues, any forecast about the future is likely to be inaccurate to
some degree since we cannot be sure about future economic conditions. For example,
revenue forecasts in every government made right before the Great Recession or the onset
of COVID-19 were highly inaccurate.
2. Ramp-Up: Some revenues would gradually increase in amount over time. When planning
for the long-term financial and operational needs of the City, the delay from policy
implementation to revenue collection should be considered.
Although the body of the report details some information about the above factors in revenue
collection, this appendix provides much more granular detail about this variance and ramp -up
of various revenue sources over time.
1. B&O Revenue Changes
Since the City’s B&O tax was first imposed beginning January 1, 2024, and since the B&O tax
currently does not include a square footage tax component, the revenue estimates come with
some uncertainty. A portion of the estimate is based upon actual business revenues reported
and business license fees paid for 2024. Additional revenues have been estimated based upon
assumptions concerning the size of business facilities within the City and statistical information
concerning potential business revenues, for which the actual amount may deviate.
Year 1 revenues are estimated to be lower than in subsequent years due to the timing of tax
return payments and compliance efforts that will be needed to educate taxpayers.
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Year 1 2 3 4 5
High Estimate $1,073,000 $3,325,000 $3,451,000 $3,560,000 $3,669,000
Average
Estimate $955,000 $2,988,000 $3,114,000 $3,223,000 $3,332,000
Low Estimate $798,000 $2,496,000 $2,622,000 $2,731,000 $2,840,000
2. Property Tax Banked Capacity
Using the City’s banked property tax capacity comes with very little uncertainty; ordinance
language can be specifically tailored to a specific revenue amount. There is a limited amount
of variance in the out-years for this banked capacity due to the levy amount assessed on new
construction, which will not be known until it occurs.
There is no ramp-up period.
3. Property Tax Levy Lid Lift
Similar to accessing Banked Capacity, the City can be fairly precise with this form of property
tax. Variance would occur in out-years with the lid lift levy rate assessed on new construction.
There is no ramp-up period.
$2,496 $2,622 $2,731 $2,840
$2,988 $3,114 $3,223
$3,332
$3,325 $3,451 $3,560 $3,669
$300
$800
$1,300
$1,800
$2,300
$2,800
$3,300
$3,800
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
1. B&O TAX CHANGES
Low Estimate Average Estimate High Estimate
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4 through 6: Sales Taxes
From 2014 to 2023, the maximum year-to-year variation in sales tax collected was ±17.7%.
The average increase in nominal (not inflation-adjusted) sales tax receipts was 2.4%.
4A. Sales Tax: Transportation Benefit District, Councilmanic
Year 1 2 3 4 5
High Estimate $3,285,007 $3,363,847 $3,444,580 $3,527,249 $3,611,903
Average
Estimate $2,791,000 $2,857,984 $2,926,576 $2,996,813 $3,068,737
Low Estimate $2,296,993 $2,352,121 $2,408,572 $2,466,377 $2,525,571
$2,297 $2,352 $2,409 $2,466 $2,526
$2,791 $2,858
$2,927 $2,997 $3,069
$3,285
$3,364 $3,445
$3,527
$3,612
$1,900
$2,100
$2,300
$2,500
$2,700
$2,900
$3,100
$3,300
$3,500
$3,700
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
4A. SALES TAX: COUNCILMATIC TBD
Low Estimate Average Estimate High Estimate
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4B. Sales Tax: Transportation Benefit District, Voter-Approved
Year 1 2 3 4 5
High Estimate $9,857,375 $10,093,952 $10,336,207 $10,584,276 $10,838,298
Average
Estimate $8,375,000 $8,576,000 $8,781,824 $8,992,588 $9,208,410
Low Estimate $6,892,625 $7,058,048 $7,227,441 $7,400,900 $7,578,521
$6,893 $7,058 $7,227 $7,401 $7,579
$8,375 $8,576 $8,782
$8,993 $9,208
$9,857
$10,094 $10,336
$10,584
$10,838
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
$11,000
$12,000
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
4B. SALES TAX: VOTER -APPROVED TBD
Low Estimate Average Estimate High Estimate
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5. Sales Tax: Criminal Justice (HB2015, New Authority)
Year 1 2 3 4 5
High Estimate $3,285,007 $3,363,847 $3,444,580 $3,527,249 $3,611,903
Average
Estimate $2,791,000 $2,857,984 $2,926,576 $2,996,813 $3,068,737
Low Estimate $2,296,993 $2,352,121 $2,408,572 $2,466,377 $2,525,571
$2,297 $2,352 $2,409 $2,466 $2,526
$2,791
$2,858 $2,927
$2,997
$3,069
$3,285
$3,364 $3,445
$3,527
$3,612
$1,900
$2,100
$2,300
$2,500
$2,700
$2,900
$3,100
$3,300
$3,500
$3,700
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
5. SALES TAX: CRIMINAL JUSTICE (NEW
AUTHORITY)
Low Estimate Average Estimate High Estimate
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6. Sales Tax: Public Safety (RCW 82.14.450)
Year 1 2 3 4 5
High Estimate $2,789,490 $2,856,438 $2,924,992 $2,995,192 $3,067,077
Average
Estimate $2,370,000 $2,426,880 $2,485,125 $2,544,768 $2,605,843
Low Estimate $1,950,510 $1,997,322 $2,045,258 $2,094,344 $2,144,608
7. Admissions Tax Changes
There is no significant ramp-up period or year-to-year changes for these revenues.
Year A. Nonprofits B. Bowling C. Foster Golf
Course
High Estimate $641,000 $81,000 $104,000
Average
Estimate $557,000 $70,000 $90,000
Low Estimate $473,000 $60,000 $77,000
$1,951
$1,997
$2,045 $2,094
$2,145
$2,370 $2,427 $2,485
$2,545
$2,606
$2,789
$2,856
$2,925
$2,995
$3,067
$1,900
$2,100
$2,300
$2,500
$2,700
$2,900
$3,100
$3,300
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
6. SALES TAX: PUBLIC SAFETY
Low Estimate Average Estimate High Estimate
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8. Gambling Tax Changes
Year 1 2 3 4 5
High Estimate $460,000 $473,800 $488,014 $502,654 $517,734
Average
Estimate $400,000 $412,000 $424,360 $437,091 $450,204
Low Estimate $340,000 $350,200 $360,706 $371,527 $382,673
9. Interfund Utility Tax Changes
Year 1 2 3 4 5
High Estimate $315,000 $338,000 $358,000 $380,000 $410,000
Average
Estimate $295,000 $314,000 $334,000 $355,000 $378,000
Low Estimate $275,000 $290,000 $310,000 $330,000 $350,000
$340 $350
$361 $372 $383
$400 $412 $424
$437 $450
$460 $474
$488 $503 $518
$300
$350
$400
$450
$500
$550
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
8. GAMBLING TAX CHANGES
Low Estimate Average Estimate High Estimate
$275 $290
$310
$330
$350
$295
$314
$334
$355
$378
$315
$338
$358
$380
$410
$270
$290
$310
$330
$350
$370
$390
$410
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
9. INTERFUND UTILITY TAX CHANGES
Low Estimate Average Estimate High Estimate
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10. Increase Franchise Fees for External Water and Sewer Districts
Year 1 2 3 4 5
High Estimate $300,000 $315,000 $330,000 $345,000 $360,000
Average
Estimate $280,000 $292,000 $305,000 $318,000 $332,000
Low Estimate $260,000 $270,000 $280,000 $290,000 $300,000
$260 $270
$280
$290
$300
$280
$292
$305
$318
$332
$300
$315
$330
$345
$360
$250
$270
$290
$310
$330
$350
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
10. WATER AND SEWER
FRANCHISE FEE CHANGES
Low Estimate Average Estimate High Estimate
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11. Permitting Cannabis Sales
Year 0 1 2 3 4 5
High Estimate $38,000 $200,000 $250,000 $300,000 $300,000 $300,000
Average
Estimate $38,000 $175,000 $200,000 $250,000 $250,000 $250,000
Low Estimate $38,000 $150,000 $175,000 $200,000 $200,000 $200,000
$150
$175
$200 $200 $200
$38
$175
$200
$250 $250 $250
$200
$250
$300 $300 $300
$0
$50
$100
$150
$200
$250
$300
$350
0
IMMEDIATE
REVENUE
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
11. PERMITTING CANNABIS SALES
Low Estimate Average Estimate High Estimate
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12A. External Utility Taxes: Electricity
Year 1 2 3 4 5
High Estimate $365,000 $383,250 $402,413 $422,533 $443,660
Average
Estimate $317,000 $332,850 $349,493 $366,967 $385,315
Low Estimate $269,000 $282,450 $296,573 $311,401 $326,971
12B. External Utility Taxes: Solid Waste
Year 1 2 3 4 5
High Estimate $159,000 $166,950 $175,298 $184,062 $193,265
Average
Estimate $138,000 $144,900 $152,145 $159,752 $167,740
Low Estimate $117,000 $122,850 $128,993 $135,442 $142,214
$365
$383
$402
$423
$444
$317
$333
$349
$367
$385
$269 $282 $297
$311
$327
$250
$300
$350
$400
$450
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
12A. EXTERNAL UTILITY TAXES —ELECTRICITY
High Estimate Average Estimate Low Estimate
$159
$167
$175
$184
$193
$138
$145
$152
$160
$168
$117 $123 $129 $135
$142
$100
$125
$150
$175
$200
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
12B. EXTERNAL UTILITY TAXES —SOLID WASTE
High Estimate Average Estimate Low Estimate
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12C. External Utility Taxes: Telephone
Year 1 2 3 4 5
High Estimate $130,000 $130,000 $130,000 $130,000 $130,000
Average
Estimate $113,000 $113,000 $113,000 $113,000 $113,000
Low Estimate $96,000 $96,000 $96,000 $96,000 $96,000
12D. External Utility Taxes: Natural/Manufactured Gas
Year 1 2 3 4 5
High Estimate $145,000 $152,250 $159,863 $167,856 $176,248
Average
Estimate $126,000 $132,300 $138,915 $145,861 $153,154
Low Estimate $107,000 $112,350 $117,968 $123,866 $130,059
$130
$113
$96
$90
$100
$110
$120
$130
$140
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
12C. EXTERNAL UTILITY TAXES —TELEPHONE
High Estimate Average Estimate Low Estimate
$145
$152
$160
$168
$176
$126
$132
$139
$146
$153
$107 $112
$118
$124
$130
$100
$120
$140
$160
$180
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
12D. EXTERNAL UTILITY TAXES —GAS
High Estimate Average Estimate Low Estimate
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12E. External Utility Taxes: Cable TV
Cable TV
Year 1 2 3 4 5
High Estimate $32,000 $29,760 $27,677 $25,739 $23,938
Average Estimate $28,000 $26,040 $24,217 $22,522 $20,945
Low Estimate $24,000 $22,320 $20,758 $19,305 $17,953
$32
$30
$28
$26
$24
$28
$26
$24
$23
$21
$24
$22
$21
$19
$18$17
$21
$25
$28
$32
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
12E. EXTERNAL UTILITY TAXES —CABLE TV
High Estimate Average Estimate Low Estimate
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13. Burglary Alarm Permits
Revenues are expected to decline as businesses are incentivized to reduce false alarms.
Year 1 2 3 4 5
High Estimate $103,140 $90,078 $81,415 $86,640 $84,578
Average
Estimate $93,764 $81,889 $74,014 $78,764 $76,889
Low Estimate $84,388 $73,700 $66,613 $70,888 $69,200
14. Parking Tax Changes
Year 1 2 3 4 5
High Estimate $61,000 $61,560 $62,175 $62,797 $63,425
Average
Estimate $53,000 $53,530 $54,065 $54,606 $55,152
Low Estimate $45,000 $45,450 $45,905 $46,364 $46,827
$84
$74
$67 $71 $69
$94
$82
$74
$79 $77
$103
$90
$81
$87 $85
$60
$70
$80
$90
$100
$110
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
13. BURGLARY ALARM PERMITS
Low Estimate Average Estimate High Estimate
$45 $45 $46 $46 $47
$53 $54 $54 $55 $55
$61 $62 $62 $63 $63
$40
$45
$50
$55
$60
$65
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
14. PARKING TAX CHANGES
Low Estimate Average Estimate High Estimate
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15. Indirect Cost Recovery for Grants
Year 1 2 3 4 5
High Estimate $46,038 $46,460 $46,925 $47,394 $47,868
Average
Estimate $40,000 $40,400 $40,804 $41,212 $41,624
Low Estimate $33,962 $34,302 $34,645 $34,991 $35,341
$34 $34 $35 $35 $35
$40 $40 $41 $41 $42
$46 $46 $47 $47 $48
$30
$35
$40
$45
$50
1 2 3 4 5ANNUAL REVENUETHOUSANDSYEAR
15. INDIRECT COST RECOVERY
Low Estimate Average Estimate High Estimate
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Appendix B: Revenue Ideas Excluded from Analysis
A. Enterprise Investments (e.g. Driving Range)
Enterprise investments refer to City-owned, business-type ventures that aim to generate
ongoing revenue. A good example in Tukwila is converting part or all of the City-owned Foster
Golf Course into a driving range, which could potentially increase revenue through higher
volume, lower overhead, or year-round usage.
Reasons for Exclusion
• Requires a full business plan, including market demand, financial modeling, and capital
investment estimates. This is beyond the scope of this revenue proviso process.
• High upfront costs and operational risks make this revenue source more speculative than
the options included in the body of the report.
• Potential for net revenue loss if the enterprise underperforms.
• Revenue outcomes are highly uncertain and would require long -term analysis and
planning.
• If Council is interested in pursuing this further, a separate, dedicated process would be
needed.
B. Excise Taxes/Sin Taxes
Excise taxes, sometimes called “sin taxes,” are targeted taxes on specific goods or activities,
such as alcohol, tobacco, or sugary beverages. These taxes are often intended to discourage
consumption or to help offset public costs associated with those products.
Reasons for Exclusion
• While technically allowed under state law, there is no existing system at the state level to
collect and remit these taxes to the City.
• The City would need to build an entirely new administrative framework to assess, collect,
and enforce these taxes
• This would likely require multiple full-time staff positions and ongoing administrative
oversight.
• Because Tukwila is geographically small, it would be simple for consumers to purchase
goods in nearby jurisdictions to avoid this tax
• Compared to other options in the report, this approach presents sharply higher startup and
operational costs, making it impractical unless interest from Council is particularly strong.
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C. Expanded Use of Investments
This involves increasing the City’s investment activity, such as purchasing more bonds or
diversifying financial holdings, to generate higher returns on City assets.
Reasons for Exclusion
• The City already actively invests in bonds and other allowable instruments under
Washington law and will continue to do so as part of its standard financial practices.
• Returns from investment activity are variable and difficult to forecast with confidence,
especially in the short term.
• Investment policy decisions are more appropriately addressed through ongoing treasury
and financial management processes rather than through this revenue proviso process.
• Unlike new taxes or fees, expanding investments does not represent a distinct policy
choice that Council must make. This is an operational financial decision already underway.
D. Improving Cost Recovery on City Services
This involves updating City fees to more accurately reflect the actual cost of providing services.
It includes revising fee schedules, improving billing practices, and evaluating whether current
subsidies for certain services remain appropriate. Examples include permitting fees, parks and
recreation charges, and facility rentals.
Reasons for Exclusion
• Efforts to improve cost recovery are already underway across multiple City departments as
part of financial and operational management.
• For many services, especially those that provide public benefit like recreational programs,
cost recovery is also a policy choice. Full cost recovery may not always align with
community values or equity goals.
• Because changes to fee schedules are often incremental and service-specific, they are
better handled as part of departmental processes rather than this citywide revenue
strategy.
• This approach, while important, does not create a large new revenue stream relative to the
options included in the main body of the report.
E. Increasing Tukwila Buy Local Practices
This involves adjusting the City’s procurement policies to prioritize purchasing from businesses
based in Tukwila. The goal is to support the local economy while modestly boosting the City’s
own revenue through increased local sales tax and business and occupation tax.
Reasons for Exclusion
• These efforts are administratively underway
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• While this supports local economic development, the direct financial benefit to the City is
limited
• Any increase in sales tax or business and occupation tax revenue would be very small
• The primary value of this approach lies in economic development and community
investment, not in substantial new revenue generation
F. Increased Grant Awards
This refers to expanding the City’s efforts to apply for and secure state, federal, and other
external grant funding to support programs, services, and capital investments.
Reasons for Exclusion
• The City already actively pursues grant funding across departments and has done so
consistently for many years.
• While grant revenue is an important part of the City’s financial picture, it is not a reliable or
controllable revenue stream for addressing structural imbalances in the General Fund.
• The City has limited ability to predict which competitive grants it will receive in a given year,
making it difficult to provide meaningful revenue estimates.
• Because grants are often one-time or restricted in use, they are not a substitute for ongoing
revenue sources like those analyzed in the body of the report.
• Grants often require a match and can often encumber the City with additional costly
requirements well into the future.
G. Indirect Cost Plan Revision
The City’s indirect cost allocation plan to ensure that the General Fund is appropriately
reimbursed by other funds for central services such as finance, HR, and IT (TIS). These costs
are partially borne by other funds who utilize these central services.
Reasons for Exclusion
• The City already has a contract in place with an outside firm for this and work is underway
to complete this revision.
• This effort does not generate new revenue for the City as a whole. Instead, it reallocates
existing costs across funds to better reflect the true cost of services.
• Because it is a reorganization of internal revenues rather than a net increase in City
resources, it was not included alongside the other external revenue options in this report.
H. Reserve Policy Changes
The City’s reserve policy could be lowered to free up one-time resources for General Fund
use. Tu kwila currently maintains reserves equal to approximately 28% of the prior year ’s
ongoing General Fund revenues. While the Government Finance Officers Association (GFOA)
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recommends a minimum of two months (approximately 16.7%) of expenses or revenues in
reserve, most local governments set a higher floor of at least three months (25%). Many in
Washington maintain even higher reserve levels depending on their individual needs.
Reasons for Exclusion
• The City's current reserve level is already in line with best practices and supports long -term
financial health.
• Maintaining higher reserves strengthens the City’s creditworthiness and reduces the cost of
borrowing when issuing bonds.
• Reducing reserves would produce a one-time infusion of revenue and offer minimal
ongoing financial resources.
• Drawing down reserves to fund operations undermines long-term stability and creates
future financial risk.
• Unlike other revenue options presented in this report, this approach does not create a
recurring funding source and is not sustainable.
I. Hotel-Motel Tax Changes
The Hotel-Motel Tax is a special additional tax applied to lodging services within the city.
Currently set at 1%, this tax is collected from visitors staying in Tukwila's hotels and motels.
Revenue generated through this mechanism comes primarily from non-residents utilizing
temporary accommodations.
Reasons for Exclusion
• City is already at the maximum allowable rate of 1%
• Hotel-Motel tax revenue is legally restricted in how it can be used, so funds cannot be
directed to assist with general fund needs
• Although the City could eliminate this special hotel/motel tax and then collect some
additional general sales tax instead, the amount of overall revenue collected by the City
would decline 68% to 100% (depending on how RCW 67.28.1816 is interpreted)
o For example, if the City did not have this 1% in special lodging tax in 2024, it may
have been able to collect $310,000 more in General Fund sales tax but would
have collected $675,000 less in lodging tax to encourage tourism
o This lost Hotel-Motel tax special use funding would have secondary negative
effects on sales tax revenue due to less investment by the City in tourism-related
activities—the restricted purpose of these funds
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J. Wireless Communication Facilities and Small Cell Site Leasing on
Municipal Light Poles
The City could lease space on city-owned street and sport field light poles and water storage
facilities to wireless carriers for wireless communication facilities and other “small cell site”
equipment, including 5G wireless and micro-cell sites. Carriers replace existing poles with
sturdier versions to support equipment.
Reasons for Exclusion
• FCC regulations cap fees at only $270 per pole per year (for Micro Sites only; not other
WCF types)
• Despite 5 years of discussions with carriers, only a few poles (if any) have been
implemented
• Limited by technical requirements as not all poles have necessary fiber internet access
• Design elements must ensure new poles maintain aesthetic consistency with existing
infrastructure, which creates additional barriers to implementation
• Historical adoption rate indicates minimal carrier interest despite the theoretical potential for
more revenue
• Other city facilities could be leased but carriers have not approached the City for such
arrangements
K. Transportation Benefit District (TBD) Vehicle License Fees
A vehicle license fee that may be imposed by cities through a Transportation Benefit District
(TBD) to fund transportation-related projects. These vehicle license fees could be imposed
either separately or in addition to a TBD sales tax. Cities may charge up to $50 per vehicle
without voter approval, though increases must occur in $10 increments every 24 months.
Cities may charge up to $100 with voter approval. Revenue from these fees must be used for
transportation improvements identified in local, regional, or state transportation plans
Reasons for Exclusion
• Although technically allowed alongside a TBD sales tax, it is uncommon for jurisdictions to
implement both at the same time.
• A TBD sales tax generates significantly more revenue and is easier to administer.
• Compliance with car tab renewals is imperfect. Approximately 10% of Washington drivers
are not current on their renewals, which further reduces predictability and yield.
L. City Sales Taxes that Tukwila Cannot Impose
Several additional sales tax mechanisms for city governments exist under Washington State
law, but Tukwila is not eligible to implement them due to statutory limitations. These include a
city-level transit sales tax, a mental health and substance use disorder sales tax, a sales tax
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for distressed public facilities districts, a cultural access sales tax, and a housing and related
services sales tax.
Reasons for Exclusion
• City Transit Sales Tax – Only cities that operate their own transit agencies may impose this
tax. Tukwila does not run a municipal transit agency.
• Mental Health and Substance Use Disorder Tax – Cities are preempted from imposing this
tax when their county already does. King County currently imposes it.
• Distressed Public Facilities District Tax – This tax is limited to qualifying public facilities
districts that are distressed. Tukwila is not eligible.
• Cultural Access Sales Tax – Cities in King County are preempted from levying this tax
because King County already imposes it.
• Housing and Related Services Sales Tax – Only cities that adopted this tax before their
county imposed it are eligible. King County now imposes this tax, and only Issaquah,
Renton, and Kent are grandfathered in.
M. Red Light Camera Program
Red light cameras automatically issue infractions to vehicles that fail to stop at designated
intersections, with the goal of improving public safety. Although the program would indeed
increase revenue, the primary intent of such a program is to reduce dangerous driving
behavior, not to raise funds for the City’s General Fund.
Reasons for Exclusion
• The main goal is to improve traffic safety, not generate revenue. It is better considered
within the context of transportation or enforcement policy.
• State law (RCW 46.63.220) requires that all revenue from red light camera infractions be
used solely for traffic safety purposes, not for general City operations.
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Appendix C: Expected Future Impact of Inflation on Major
City Revenues
Like nearly all cities in Washington State, the two main revenues in the City’s General Fund
consist of Property Taxes and Sales Taxes. Taken together, these revenue sources were
slightly over half of General Fund revenue in 2023 and 2024.
From 2014-2024, although both Property Tax and Sales tax increased considerably in nominal
amounts, when adjusting for inflation, the real values of these revenues were considerably
less.
Revenue Type 2014 2024 Difference ($) Difference (%)
Sales and Use Tax
Nominal 17,105,322 23,729,637 +6,624,315 +38.7%
Inflation-Adjusted 17,105,322 17,329,555 +224,233 +1.3%
Property Tax
Nominal 14,186,753 18,106,912 +3,920,159 +27.6%
Inflation-Adjusted 14,186,753 13,223,326 (963,427) -6.8%
Sales tax remained largely flat over this decade, increasing in real terms by only 1.3%, or $224
thousand. Property tax declined in real terms by 6.8%, or $963 thousand. Taken together, the
purchasing power of these key local government revenues declined over the past decade.
These declines in inflation-adjusted revenues are not unique to Tukwila. Washington State
policies, particularly during the 40-year-high inflation rates during the past few years, have
severely reduced the purchasing power of the key revenues available to local governments.
Simultaneously, like most businesses, governments, and non-profits, costs have continued to
climb at or near the overall rate of inflation. Many costs have increased at a much higher rate
than overall inflation, including healthcare expenses.
Five of the most significant revenue options listed in this report are some forms of sales tax or
property tax. Based on the experience of the past decade, and without policy changes from the
state government, the default assumption should be that these major revenues will not
increase at the same pace as expenditures over time. This includes the sales tax and
property tax options listed in this report.
If the budget were perfectly balanced today, the future inflation-adjusted value of these key
revenues would be expected to decline, meaning expenditures would outpace these revenues,
even if everything in the City remained exactly the same. This dynamic, common across
Washington cities, means that achieving long-term budget stability will require more than
simply closing today’s budget gap.
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$14,000,000
$15,000,000
$16,000,000
$17,000,000
$18,000,000
$19,000,000
$20,000,000
$21,000,000
$22,000,000
$23,000,000
$24,000,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Nominal and Inflation-Adjusted Sales Tax Revenue
Sales Tax: Inflation-Adjusted Value Sales Tax: Nominal Amount
$11,000,000
$12,000,000
$13,000,000
$14,000,000
$15,000,000
$16,000,000
$17,000,000
$18,000,000
$19,000,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Nominal and Inflation-Adjusted Property Tax
Revenue
Property Tax: Inflation-Adjusted Value Property Tax - Nominal Amount
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Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Consumer Price
Index: Seattle-
Tacoma-Bellevue
CPI-U
245.125 247.614 253.122 260.656 269.527 276.23 281.281 289.628 315.507 337.109 351.426
Annual Inflation Rate:
Seattle-Tacoma-
Bellevue
Base Year 1.0% 2.2% 3.0% 3.4% 2.5% 1.8% 3.0% 8.9% 6.8% 4.2%
Sales Tax: Nominal $ 17,105,322 19,334,152 18,908,190 18,807,201 20,603,618 20,687,748 17,102,061 20,148,103 20,850,313 21,693,508 23,729,637
Sales Tax: Inflation
Adjusted $ 17,105,322 19,139,806 18,314,821 17,706,518 18,795,561 18,453,649 15,010,354 17,234,950 16,569,191 16,349,680 17,329,555
Property Tax:
Nominal $ 14,186,753 14,323,133 14,494,747 14,857,787 15,177,011 15,545,878 16,251,567 17,124,167 17,233,512 17,536,670 18,106,912
Property Tax:
Inflation Adjusted $ 14,186,753 14,179,158 14,039,879 13,988,241 13,845,162 13,867,056 14,263,882 14,648,236 13,695,016 13,216,808 13,223,326
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Appendix D: General Fund Forecast Made In Fall 2024
Six-Year Financial Forecast
Forecasting is a long-term planning tool that encourages strategic thinking and provides
decision-makers with the tools to allow for making better business decisions by focusing on
long-term objectives and the future impact of current decisions. Long-term financial planning
provides a platform for analyzing trends as well as risk factors that may impact the City’s
financial standing and allows for the organization to be proactive in addressing any emerging
issues. This planning, which includes maintaining a six-year financial forecast for the General
Fund, helps to provide awareness of the financial standing of the City to the City Council,
employees, and the greater Tukwila resident and business communities.
The forecast revenue and expense assumptions are based on a five -year trend with any
known outliers excluded. The forecast is built assuming status quo operations meaning that
no new positions, programs, or program expansions are included in the analysis. Similarly, the
forecast assumes no programs, services, or positions are eliminated. Any known future
changes are included in the numbers, such as a scheduled retirement of debt or changes in
State-shared revenues.
Forecast Key Takeaways
• Forecasts are reliably unreliable. That doesn’t diminish their power as a tool for
decision-makers considering operational adjustments.
• Without structural changes (labor cost model, service delivery methods, use of
technology; organizational structure, etc.), the General Fund will consume the entirety of
its available fund balance within the forecast range ending 2030.
• The structural imbalance for 2025 is $3.6 million and in 2026 it is $5.4 million when one-
time land sale proceeds are removed from budget consideration.
Why Does the Forecast Assume Status Quo
The status quo assumption is very unlikely, and we could forecast increases in positions and
programs based on past trends. However, we choose not to include these in our forecast to
avoid creating an anchoring effect, a reference point to make subsequent judgements, by
creating an expectation of continued staffing growth and rate increases necessary to sustain
that growth. The forecast is designed to illustrate the difference between revenue and
expense growth in the status quo over a period of years.
Budget Sustainability
The City is legally required to adopt a balanced budget where resources are at least equal to
budgeted expenses. However, adopting a balanced budget does not necessarily mean the
budget is sustainable. A sustainable budget exists when normally occurring operational
revenues are equal to normally occurring and ongoing expenses and where extraordinary
resources are used for one-time expenditures. Like most government entities, the City is
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experiencing a budget sustainability challenge where expenses increase each year at a rate
that exceeds the growth of resources. Forecasted revenues for 2027 – 2030 increase by an
average of 2.7% annually while expenses for the same period increase by 3.6 %. This
structural imbalance demonstrates that without a new revenue source, an increase in rates,
decrease in expenses, or a combination of those things, the City will need to balance its
budget over time using one-time resources. As shown below, this budget model is not
sustainable over more than just a few years.
Administration has already taken up the challenge in 2025 to begin work on solutions to
achieve a sustainable budget over time. This initiative is differentiated from prior endeavors-
where short-term strategies are typically employed to balance the budget for the next
biennium. This initiative focuses on right-sizing expenditures and service levels to available
revenues over a prolonged period of time- six years. Difficult choices will need to be made
about ongoing City services and operations. Mayor and Council priorities, the Financial
Sustainability Committees’ recommendations, community survey data and the City’s strategic
plan will be used to guide those conversations.
Understanding the Forecast
Tukwila’s forecast starts from our adopted or proposed budget and makes an educated guess
at the future revenues and expenses based on an analysis of past trends, current conditions,
and likely future conditions. The basis for the forecast is that if our assumptions hold true, we
will experience a certain outcome. Based on our assumptions, the forecast below
demonstrates a long-term financial footprint that is not sustainable where expenses exceed
revenue and where reserve funds are needed to support operations.
Forecasts are fluid and are created to estimate future years’ financial standing at a current
point in time. The forecast is likely to change substantially in the next few years as decisions
are made that affect the City’s financial position. Additionally, any future changes to local and
national economic indicators incorporated in the forecast will affect future forecast
assumptions. Finally, forecasts are not an absolute and people may differ on what
assumptions to use. All forecasts, especially those that look out months or years into the
future, involve guesswork and assumptions and are reliably incorrect. However, this does not
diminish their power as a tool for decision-makers considering operational adjustments.
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The forecast assumptions used to calculate future revenues and expenses are shown below:
Annual % Change
Revenue Assumptions 2026 - 2027 2027 - 2030
Sales & Use Tax 1.5% 3.0%
Property Tax 1.8% 1.8%
Gambling & Excise Tax 1.9% 1.9%
Business & Occupation Tax 2.0% 2.0%
Private Utility Tax 4.5% 4.5%
Public Utility Tax 6.4% 6.4%
Admissions Tax 2.0% 3.0%
Charges for Services 1.5% 1.5%
Other/Misc Income 1.0% 1.0%
License & Permits 2.7% 2.7%
Indirect Cost 5.0% 5.0%
Intergovernmental 1.0% 1.0%
Franchise Agreements 5.0% 5.0%
Fines & Penalties 1.0% 1.0%
Annual % Change
Expense Assumptions 2026 - 2030
Salaries (inc. OT, Extra Labor, Holiday Pay) 3.2%
Historical Salary Underspend -3.1%
Medical & Dental 7.0%
FICA 3.2%
PERS/PSERS Pension 3.2%
Industrial Insurance 7.0%
LEOFF 2 Pension 3.2%
Uniform/Clothing 2.0%
Unemployment 0.0%
All Other Operating/Service/Supplies 3.0%
Using our past experiences, and known future changes, we can anticipate trends over time.
Inflation and growth in population have been contributors to our increases in revenue and
expense in most years, but different revenue and expenses tend to grow at d ifferent rates. As
an example, in the charts above, we are assuming sales tax revenue will continue to increase
by a larger percentage than property tax collections in most years. Similarly, because of the
trend in market conditions, we assume employee benefits (medical and dental insurance
costs) will increase at a larger percentage year over year than salaries. At times, our actuals
fail to follow an established trendline and we need to decide if that constitutes a change in
trend or a short-term anomaly which should be excluded from our forecast calculations as an
outlier.
Another tool we use to help shape our future growth assumptions are national, state, and local
key economic indicators. A few of those key indicators are:
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•Nationally:
o Two key measures for consumer confidence moved in opposite directions in
September.
o Gross Domestic Product (GDP) increased by 3.0% in Q2, compared to a 1.6%
Q1 increase.
o Consumer prices increased 2.4% over last year.
•Locally:
o Washington’s unemployment rate has been steady each month since March.
o Seattle-area home prices increased for the fourth consecutive month.
o Washington personal income increased by 5.1% in the second quarter.
o State-wide, retail sales tax and B&O collections increased 2.5% & 2.1%
respectively.
Forecast Excluding Budgeted Land Sales in 2025 & 2026
The table and line graph below represent our six-year forecast calculations rolled up to
category totals in the table and total revenues and expenses in the line graph. This forecast
view excludes budgeted land sales in 2025 and 2026 of $4.7 and $5.0 million respectively.
The proposed budget includes these land sales to balance the budget for the coming biennium
but, as one-time revenues, they should be used for one-time expenses and not to balance
resources with ongoing expenses. Additionally, without land sales, the General Fund will not
meet its fund balance reserve policy requirement beginning in 2025. Without structural
changes, the General Fund will consume the entirety of its available fun d balance in 2028.
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The table and line graph below also demonstrate that without the land sales budgeted in 2025
& 2026, the General Fund shows an imbalance of roughly $3.2 and $5.0 million respectively.
As mentioned previously, beginning early in 2025, the Mayor has tasked the Tukwila
Leadership Team to begin looking at solutions to this structural imbalance.
General Fund 2025
Proposed Budget
2026
Proposed Budget
2027
Projected
2028
Projected
2029
Projected
2030
Projected
Total Taxes 51,976,379$ 53,854,765$ 55,049,065$ 56,671,954$ 58,352,642$ 60,043,812$
Total Non-Tax Revenues 17,916,352 17,930,727 18,305,533 18,882,956 19,483,210 20,107,308
Total Ongoing Revenues 69,892,731 71,785,492 73,354,598 75,554,910 77,835,851 80,151,120
Transfers In & Bond Proceeds 1,494,619 1,419,637 1,318,824 1,317,654 1,317,225 1,274,624
Total Revenue and Transfers In, excluding Property Sales 71,387,350 73,205,129 74,673,422 76,872,564 79,153,076 81,425,744
Expenditures - EXCLUDING Expenditures Reated to One-Time Property Sales
Salaries and Benefits 46,318,094 49,101,228 50,986,699 52,954,529 55,008,895 57,154,216
Salary Underspend (1,138,218) (1,174,641) (1,212,230) (1,251,021)
Services 22,109,457 22,326,305 24,026,094 24,746,877 25,489,283 26,253,962
Supplies 1,640,914 1,667,078 1,717,090 1,768,603 1,821,661 1,876,311
Capital 200,000 - - - - -
Principal, and Interest 30,205 30,205 968,127 - - -
Debt Service Transfers Out 3,692,390 3,784,347 3,787,556 3,789,292 3,782,274 4,093,895
Other Transfers Out 971,089 702,450 1,030,000 1,310,000 1,310,000 1,310,000
Other Non-Operating - - - - - -
Total Expenditures and Transfers Out, excluding costs
related to property sales 74,962,150 77,611,612 81,377,348 83,394,660 86,199,883 89,437,362
General Fund - Fund Balance
Beginning Fund Balance 15,564,070 13,030,075 8,726,516 2,022,589 (4,499,506) (11,546,312)
Surplus/Deficit (3,574,799) (5,406,483) (6,703,926) (6,522,095) (7,046,806) (8,011,618)
Salary Underspend 1,040,804 1,102,925
Ending Fund Balance 13,030,075 8,726,516 2,022,589 (4,499,506) (11,546,312) (19,557,930)
Reserve Fund Balance Policy Met?No No No No No No
Revenues - EXCLUDING Revenues From One-Time Property Sales
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Forecast Including Budgeted Land Sales in 2025 & 2026
The table and line graph below represent our six-year forecast calculations rolled up to
category totals in the table and total revenues and expenses in the line graph. However, this
forecast includes the one-time land sales as included in the proposed budget. With these one-
time revenues supporting ongoing operations, both 2025 and 2026 show the General Fund
with a surplus at the end of the year and meeting the City’s fund balance requirements for
those years. However, with those one-time revenues removed from the forecast in later years
as an outlier, the 2027 budget shows the General Fund in a deficit position and not meeting
fund balance policy requirements. Without structural changes, the General Fund will consume
the entirety of available fund balance in 2030.
General Fund With Land Sales 2025
Proposed Budget
2026
Proposed Budget
2027
Projected
2028
Projected
2029
Projected
2030
Projected
Revenues
Total Taxes 51,976,379$ 53,854,765$ 55,049,065$ 56,671,954$ 58,352,642$ 60,043,812$
Total Non-Tax Revenues 17,916,352 17,930,727 18,305,533 18,882,956 19,483,210 20,107,308
Total Ongoing Revenues 69,892,731 71,785,492 73,354,598 75,554,910 77,835,851 80,151,120
Transfers In & Bond Proceeds 1,494,619 1,419,637 1,318,824 1,317,654 1,317,225 1,274,624
Sale of Capital Assets 4,700,000 5,000,000 - - - -
Total Revenue and Transfers In 76,087,350 78,205,129 74,673,422 76,872,564 79,153,076 81,425,744
Expenditures
Salaries and Benefits 46,318,094 49,101,228 50,986,699 52,954,529 55,008,895 57,154,216
Salary Underspend (1,138,218) (1,174,641) (1,212,230) (1,251,021)
Services 22,109,457 23,326,305 24,026,094 24,746,877 25,489,283 26,253,962
Supplies 1,640,914 1,667,078 1,717,090 1,768,603 1,821,661 1,876,311
Capital 200,000 - - - - -
Principal, and Interest 30,205 30,205 968,127 - - -
Debt Service Transfers Out 3,692,390 3,784,347 3,787,556 3,789,292 3,782,274 4,093,895
Other Transfers Out 971,089 702,450 1,030,000 1,310,000 1,310,000 1,310,000
Other Non-Operating - - - - - -
Total Expenditures and Transfers Out 74,962,150 78,611,612 81,377,348 83,394,660 86,199,883 89,437,362
General Fund - Fund Balance
Beginning Fund Balance 15,564,070 17,730,075 18,426,516 11,722,589 5,200,494 (1,846,312)
Surplus/Deficit 1,125,201 (406,483) (6,703,926) (6,522,095) (7,046,806) (8,011,618)
Salary Underspend 1,040,804 1,102,925
Ending Fund Balance 17,730,075 18,426,516 11,722,589 5,200,494 (1,846,312) (9,857,930)
Reserve Fund Balance Policy Met?Yes Yes No No No No
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Identified Risks
•Budget Sustainability: The 2025 & 2026 operating budget is balanced using one -time
resources from land sales. The true gap in those years is $3.6 and $5.4 million
respectively. Without additional resources, a reduction in expenses, or a combination
of those, the financial standing of the City will continue to erode, forcing a reduction of
services to the Tukwila resident and business communities.
•Staffing & Service Levels: Forecast assumes flat staffing levels. It is unlikely the
existing staff will be able to keep pace with service demand over time. Without an
increase in staffing or other measures, and an associated funding source, the outcome
will be a degradation of existing service levels.
•Infrastructure Repair & Maintenance: Difficulty fully funding necessary infrastructure
repair and maintenance needs, and capital replacement reserves, on an ongoing basis
and relying on onetime resources to provide some level of funding for those purposes.
The lack of ongoing, sustainable funding may result in deterioration of infrastructure,
especially in the General Fund.
•Economic Recession & Slowdowns: The City’s General Fund is heavily dependent on
taxes. Sales and use tax, business and occupation tax, and taxes on utilities are volatile
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and impacted by the economy. As the forecast for revenue is based on trends excluding
outliers, it is possible that revenue growth may not be sustained and could decline, or
increase at a slower rate, than projected. This would further impact the City’s ability to
fund services.
•Legislative Changes: Unfunded mandates and changes in federal, state, and county
priorities or their fiscal position may impact shared revenues and sources. The City is at
risk of being negatively impacted by upstream policy decisions affecting revenue
changes and reduced service levels from other levels of government.
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City Council Proviso: Revenue OptionsJuly 20251Attachment B97
1. Budget Sustainability Efforts at the City2. The Revenue Proviso Process3. Scope of the Report4. How to Read the Report5. What’s in the Appendices and Why it Matters6. Full List of Revenue Options Studied7. Next StepsAgenda298
• The City is facing a structural imbalance: ongoingrevenues are not keeping pace with ongoingexpenses.• The 2025–2026 biennial budget is balanced but relieson one-time resources to fund ongoing operations.• The Mayor and Council have made long-term budgetsustainabilitya top priority for 2025.• The 2025–2026 budget Ordinance includes aRevenue Provisodirecting staff to return midyear withpotential new revenue options.Budget Sustainability Efforts at The City399
This revenue report is one piece of a larger City-wide strategy, which includes five workgroups:Revenue Options (this report)Immediate Changes, Efficiency Improvements, and Out-of-the-Box IdeasSalary and Benefits PoliciesOperating ExpendituresCapital & Utilities Maintenance and Improvement ExpendituresBudget Sustainability Efforts at The City4100
• The Revenue Proviso Team formed in January 2025 asa cross-departmental effort, primarily consisting oftwelve key staff.• The team held multiple work sessions to define thescope, assign responsibilities, and develop aconsistent framework for analysis.• The focus of the report is on revenue options that couldplay a role in helping close the City's structural deficitover time.The Revenue Proviso Process5101
• Focuses on revenue options currently available under state law:• Includes both councilmanic and voter-approved options.• All options analyzed through a consistent set of criteria.•Designed as a technical resource, not a policy recommendation.• Supports comparison, deliberation, and follow-up.• Excludes options that:• Require significant new operational structures (e.g., city-run enterprises or excise taxes).• Are legally unavailable to Tukwila due to state preemption or eligibility rules.•Thisreport does not analyze expense reductions, but is meant to complement that parallel work.• A total of 15 revenue options are presented, plus discussion of other ideas excluded.Scope of the Report:What’s In, What’s Out6102
• Each revenue option is analyzed using a standardizedframeworkto support side-by-side comparison.• Key elements include:•Estimated revenue potential•Time to implement•Legal and procedural requirements•Administrative effort•Who ultimately pays•Equity impacts (e.g., regressive vs. progressive)•Peer usage and other relevant considerationsHow to Read the Report7103
• Report is organized in two parts:•A summary table for quick comparison.•Detailed profiles for each revenue option.• Intended as a starting point for policy conversations, not a recommendation.• Council can use this report to identify:• High-potential options.• Questions for further analysis.• Topics for public engagement.How to Read the Report8104
More Information on these options can be found on the Summary Table and Detailed Profile pages of the report1. B&O Revenue Changes 2. Property Tax Banked Capacity3. Property Tax Lid Lift4. Sales Tax: Transportation Benefit District (Councilmanic & Voted)5. Sales Tax: Criminal Justice(HB 2015)6. Sales Tax: Public Safety(RCW 82.14.450)7. Admissions Tax Changes (Non-profit, Bowling, & Golf Course)8. Gambling Tax Changes9. Interfund Utility Tax Changes10. Franchise Fee Increase11. Permitting Cannabis (parallel track, PCD item in July) 12. External Utility Tax Changes13. Burglary Alarm Permit 14. Parking Tax Changes15. Indirect Cost Recovery for GrantsRevenue Options9105
Information on these options can be found in Appendix BEnterprise Investments Excise / Sin TaxesExpanded Use of InvestmentsImprove Cost Recovery on City ServicesIncreasing Buy Local Practices Increased Grant AwardsIndirect Cost Plan Revision Reserve Policy ChangesHotel-Motel Tax Changes Cell Tower LeasingTransportation Benefit District License FeesUnavailable City Sales Taxes Red Light Camera ProgramRevenue Options Excluded from Analysis10106
• The appendices provide key context and caveats that support the main analysis in the report.• The appendices help turn a list of options into a more detailed understanding of what’s possible, and what challenges come with them•Appendix A: Revenue Variance and Ramp-Up• Shows how actual collections may vary from estimates• Helps Council plan around uncertainty and delayed impacts•Appendix B: Revenue Ideas Considered but Excluded• Explains what didn’t make the cut and why• Covers ideas like excise taxes, enterprise investments, and state-preempted tools•Appendix C: Impact of Inflation on Revenues• Highlights how property and sales tax haven’t kept up with costs over the past decade• Reinforces the long-term imbalance between revenues and expenditures within Washington state policy•Appendix D: General Fund Forecast (Fall 2024)• Details projected structural deficit from 2025–2030What’s in the Appendicesand Why it Matters11107
•Review the report with an eye toward options you may want to explore further• Staff are available to provide additional analysis and to provide technical knowledge scenario modeling •Identify areas of interest for follow-up discussion•Continue integrating this work into the broader budget sustainability strategy• Revenue decisions will need to align with work on expenses and service levels.• Mayor will present his recommendations on revenue and expense changes this fall or winter.Next Steps12108