The City of Centralia will take the allowed annual 1% property tax revenue increase for 2027 as the first step in seeking to close a nearly $2 million predicted budget shortfall over the next two years.
The Centralia City Council unanimously approved the second reading of Ordinance 2583 during its Tuesday evening meeting.
The second approval of the policy makes it official that the city will take a 1% property tax revenue increase, which represents $23,260.90 in tax revenue for the city for next year. The ordinance passed without significant discussion.
A separate discussion of the budget as a whole and options for cutting expenses or raising tax revenue touched on the potential for a new business and occupation tax or possibly a square footage tax, which appear to be the only options under consideration for additional tax revenue.
The council held two public hearings on the proposed 1% property tax increase ahead of the final approval, first during its meeting on Tuesday, Oct.13, during which the council approved the first reading of the levy ordinance.
No members of the public provided comments during either of the two public hearings. While the councilors have had significant discussion on the year's budget during council meetings, as well as a smaller group within the council’s finance committee, there has been no significant discussion or questions concerning the increase in property tax revenue, which has passed unanimously on both readings.
The current property tax revenue for the City of Centralia for 2026 is $2,326,089.77. With the 1% increase, the city will collect $2,349,350.67 in property taxes next year before calculating additional revenue increases from newly constructed properties and a number of other small exceptions to the traditional 1% rule, or adjustments from the county assessor.
According to Centralia Finance Director Bret Brodersen, the city’s current levy rate for 2026 for properties in the area sits at roughly $0.86 per $1,000 of assessed property value. That rate is relatively low compared to local property taxes in other jurisdictions. Centralia residents also paid an additional $0.40 per $1,000 of assessed property value levy rate for fire services in 2026, which may be included in a city property tax in other jurisdictions.
The increase will do little to close a gaping hole in the city’s two-year budget with a roughly $1.16 million shortfall in 2027 and an $850,000 shortfall in 2028. The city also expects to collect roughly $8.5 million in sales tax revenue over the two-year budget cycle and $8.5 million in utility tax revenue, neither of which have seen major increases over the last four years.
This is the second budget cycle in a row that Centralia has taken the maximum property tax levy increase that it can as it has faced back to back budget shortfalls. The city faced a predicted $1.1 million shortfall when preparing its 2025-2026 two-year budget.
In order to close the budget gap in the last budget cycle, the city used virtually all of its one-time options, including using many years worth of “banked capacity." In the state of Washington, governments cannot increase their property tax revenues by anymore than 1% each year, with some exceptions. Governments are able to save that capacity, allowing for an additional 1% in revenue for each year that no increase was taken.
According to previous reporting by The Chronicle, during the city’s last budget process, the city’s property tax levy revenue sat at $1,067,972.17 in 2023. By using banked capacity and other maneuvers, the city was able to nearly double its yearly property tax revenue, which sat at around $1 million for the 2023-2024 budget cycle and jumped up to $2.23 million for 2025 and $2.3 million in 2026.
Centralia City Manager Micheal Thomas also spent roughly an hour discussing the budget in more depth with the councilors Tuesday evening to highlight the different options available to close the city’s $2 million budget shortfall.
“I know there's a lot of folks out there saying we can do all sorts of things, but you basically have three options available to you,” Thomas said. “This goes for any city in this situation. You can raise revenues, you can cut staff and services, or you can do both.”
If the city council decides that it cannot stomach making cuts to the city budget, a traditional business and occupation tax or a square footage tax may be the only options for collecting significant revenue.
According to Brodersen, the city has exhausted all of its options for collecting additional revenue without seeking approval from the voters after taking the 1% increase and passing a small public safety sales tax increase earlier this year.
For recent reporting by The Chronicle on the city’s ongoing budget process visit https://tinyurl.com/4k2udhnw.
