City and Town Budget Procedures
This is a step-by-step overview of the required budget procedures for cities and towns in Washington State, along with tips and recommendations for an effective process.
It is part of MRSC's series on Budgeting in Washington State.
For a quick overview of the statutory deadlines for the current budget preparation year, see our page City and Town Budget Calendar.
The annual fiscal period for cities and towns is January 1 to December 31. Annual budget requirements are provided in:
Seattle’s budget requirements (chapter 35.32A RCW) are different and are not discussed on this page.
A number of cities use a two-year biennial budget process. All the budget adoption procedures and deadlines below are the same, plus there is a required mid-biennium budget review and adjustment that must occur sometime between September 1 and December 31 of the first year of the biennium. Biennial budget requirements are listed in:
For cities adopting a biennial budget, the procedures on this page only apply in even-numbered years, with the mid-biennium budget review taking place in odd-numbered years. This is because state law requires that city biennial budgets begin on January 1 of an odd-numbered year.
For more information and examples of biennial budgeting processes, see our page Biennial Budgeting.
The roles of the budget makers may vary by municipality. For instance, many of the budget statutes refer to the “clerk,” but the title of "clerk" might be the clerk-treasurer or finance director in your jurisdiction. The “clerk” is defined in statute as “the officer performing the functions of a finance or budget director, comptroller, auditor, or by whatever title [the officer] may be known…”
Similarly, the statutes refer to the “chief administrative officer” (CAO), but this definition includes mayors, city managers/administrators, or the budget/finance officer designated by the CAO to perform these functions. The guidelines and procedures posted here reflect the statutory language.
There are a few items that are not addressed within the budget statutes but are considered essential to local government financial planning. For example:
- Strategic planning sessions, budget retreats, and financial policy updates provide direction and focus to the budget process.
- Capital facilities plan updates are required for GMA cities, and capital improvement plan updates are vital to the budget planning process.
- Updating your cost allocation formulas and data will help enhance the budget forecasting numbers.
We suggest that you consider incorporating these pre-budget steps into your budget calendar.
For help crafting your financial policies and procedures, see our Financial Policies Tool Kit, which provides detailed guidance and key questions to consider for a number of financial topics, as well as links to best practices and sample documents from other jurisdictions.
Statutory Deadline: On or before the second Monday in September, or at such time as the city or town may provide by ordinance or charter. See:
The budget process begins with the “request for budget” when the clerk requests all department heads and those in charge of municipal offices to prepare detailed estimates of the probable revenue from sources other than ad valorem (property) taxes and of all expenditures required by his or her department for the next fiscal year (calendar year). For a simple example, see MRSC's Sample Budget Request Letter.
The clerk is responsible for preparing the estimates for interest and debt redemption requirements and all other estimates not being prepared by the department heads, including the amount to be raised by ad valorem taxes and unencumbered fund balances estimated to be available at year end.
Practice Tip: Budget proposals are made up of estimates and predictions about the future that are based on historical data and trends. Historical sales tax and property tax data can be obtained from the state Department of Revenue (DOR) website (sales taxes and property taxes) or the State Auditor's Office Financial Intelligence Tool (FIT). To help with evaluating the data, GFOA provides guidance in the form of best practice articles such as Financial Forecasting in the Budget Preparation Process.
Statutory Deadline: On or before the fourth Monday in September, or at such time as the city or town may provide by ordinance or charter. See:
Within 14 days of the request for budget (unless your jurisdiction has established a separate timeline) all department heads and program managers must file their estimates of revenue and expenditures for their programs and/or departments with the clerk.
Practice Tip: It is important to provide staff with guidelines that clearly identify the budget goals, objectives, and any limitations on expenditure requests that may be applicable. A uniform budget information form can help staff in providing estimates consistent with the budget objectives.
Statutory Deadline: On or before the first business day in the third month (October) prior to beginning of the fiscal year, or at such time as the city or town may provide by ordinance or charter. See:
Upon receipt of the estimates prepared by department heads and program managers, the clerk must submit the proposed preliminary budget to the CAO. The preliminary budget should set forth the complete financial program, showing expenditures requested by each department and the proposed sources of revenue by which those programs will be financed. The CAO then may make modifications, revisions, or additions as they see fit.
The RCW additionally requires that the revenue and expenditure sections be presented for each fund in a comparative form that will display the actuals for the last fiscal year, the estimates for the current fiscal year, and the budget projections for the ensuing fiscal year.
The revenue section must include the amount to be raised from property tax levies and unencumbered fund balances estimated to be available at the close of the current fiscal year. The expenditures must include a salary or salary range for each office, position, or job classification. Salaries may be set out in total amounts under each department if a detailed schedule of such salaries and positions is attached to and made a part of the budget document.
Statutory Deadline: No later than the first Monday in October. See:
Once the CAO has approved the preliminary budget, making modifications as necessary, they present it to the city council along with current information on estimates of revenues from all sources as adopted in the budget for the current year.
The city council must hold a public hearing (see below) on revenue sources for the coming year’s budget, including consideration of possible increases in property tax revenues. See RCW 84.55.120. Due to the number of public hearings required of cities and towns during the budget process, we suggest that the property tax hearing precede the preliminary budget hearing, which would place the property tax levy hearing sometime between mid-October and mid-November.
Practice Tip: The city or town must set by ordinance the amount to be raised by ad valorem tax. For examples, see the DOR website. If the city or town wants to increase its levy amount as allowed by law or bank its levy capacity, the council must adopt a resolution or ordinance stating the increase in terms of both dollars and percentage. If the percentage is less than the lawful limit the remainder will be banked. However, if the implicit price deflator is lower than 1%, cities with a population of 10,000 or greater must also adopt a resolution of substantial need to levy or bank the full 1% increase. See our property tax page for additional information.
Statutory Deadline: At least 60 days before the beginning of the next fiscal year. See:
The CAO prepares the preliminary budget in detail, making any revisions or additions to the reports of the department heads deemed advisable. Once this is filed with the clerk, it is considered the recommended final budget.
Practice Tip: Preparing a balanced budget is one of the most challenging tasks for the CAO. Articles such as The Economy is Better – So Why is My Budget So Hard to Balance?, by Mike Bailey and Achieving a Structurally Balanced Budget, a GFOA best practice guide, will provide some insight.
Statutory Deadline: At least 60 days before the beginning of the next fiscal year. See:
The budget message is both a required element of the budget and key component of communicating the budget program and objectives. The RCW requires that the budget message contain the following key points:
- An explanation of the budget document.
- An outline of the recommended financial policies and programs of the city for the ensuing fiscal year.
- A statement of the relation of the recommended appropriation to such policies and programs.
- A statement of the reason for salient changes from the previous year in appropriation and revenue items.
- An explanation for any recommended major changes in financial policy.
See MRSC's Sample Budget Message.
Public notice is required for each public hearing that must be held during the budget process. The number of public hearings held during the budget process may vary depending upon local policy or procedure. At a minimum there should be three hearings: a revenue hearing, a preliminary hearing, and a final hearing. (See Step 9 below.)
Statutory Deadline: Once the final budget proposal has been filed, notice of the final budget hearing must be published once a week for two consecutive weeks, although the statutes do not provide an exact deadline. The final hearing date is the first Monday in December, which requires the publication notice to be published in November. See:
Statutory Deadline: No later than six weeks before January 1. See:
Practice Tip: There are many different ways of communicating budget information. While the full budget document may be useful for the city council, simpler, more engaging versions that balance text and numbers with simple graphs are a better way of helping the public understand the budget story. Budget-At-A-Glance documents or online budget portals are also popular tools.
The number of public hearings held during the budget process may vary depending upon local policy or procedure. At a minimum there should be three hearings, as reflected below. Also see our page on Public Hearings.
- Revenue Hearing – The city council must hold a public hearing on revenue sources for the coming year's budget (RCW 84.55.120), including consideration of possible increases in property tax revenues, prior to the ad valorem/property tax certification deadline, which is November 30 (see Step 10 below). After the hearing, a city may choose to pass an ordinance at the same meeting authorizing a property tax increase in terms of dollars and percent increase from the previous year. Due to the number of public hearings required of cities and towns during the budget process, we suggest that the property tax hearing precede the preliminary budget hearing, which would place the property tax levy hearing sometime between mid-October and mid-November.
- Preliminary Hearing – The city council, or a committee thereof, must schedule a preliminary hearing on the budget prior to the final budget hearing, which must be on or before the first Monday in December, and may require the presence of department heads. See RCW 35.33.057 / RCW 35A.33.055 (annual budgets) and RCW 35.34.090 / RCW 35A.34.090 (biennial budgets).
- Final Budget Hearing – The city council must conduct a final budget hearing on or before the first Monday in December, and the hearing may be continued from day-to-day, but no later than December 7 (the 25th day prior to the next fiscal year). See RCW 35.33.071 / RCW 35A.33.070 (annual budgets) and RCW 35.34.110 / RCW 35A.34.110 (biennial budgets).
Statutory Deadline: November 30. See RCW 84.52.070.
By November 30, cities and towns must certify to the county assessor the amount of property taxes to be levied upon the property within their jurisdiction for the coming fiscal year.
If your jurisdiction misses the November 30 deadline, you may not increase the levy amount above the prior year’s level. See RCW 84.52.070(3).
DOR provides samples of the required property tax increase ordinance/resolutions for local governments to meet this requirement.
Adopting the required ordinances and/or resolutions is a critical component of the budget process. If the implicit price deflator (IPD) is lower than 1%, cities with a population of 10,000 or greater must also adopt a resolution of substantial need to levy or bank the full 1% increase. For more information on the IPD or examples of substantial need resolutions, see our page Implicit Price Deflator.
Statutory Deadline: Following the final public hearing and prior to the beginning of the ensuing fiscal year (no later than December 31). See:
The city council adopts budget for the ensuing year following the final public hearing and prior to the beginning of the next fiscal (calendar) year.
Practice Tip: The budget ordinance can take on many forms depending upon whether your jurisdiction adopts at the fund level or department level, or includes the ending fund balance or displays appropriations separately from the ending fund balance. For examples of these formats, see MRSC's Sample Budget Ordinance. The budget ordinance format adopted by the city or town should be consistent with the detailed budget document approved by the city council.
Statutory Deadline: None, but recommended immediately following adoption. See:
Cities and towns are required to submit a copy of the final budget to AWC, but AWC has asked MRSC to be the recipient of those documents. Please send a web link or electronic document to Gabrielle Nicas.
In addition, code cities adopting an annual budget, and any city or town adopting a biennial budget, must also submit a copy to the State Auditor's Office. SAO has advised us that they prefer electronic copies of the budget (preferably a web link or, if your city or town does not post the budget online, a PDF attachment) to be emailed to WAStateAuditorSubscriptions@sao.wa.gov, with the city/town name and the word “budget” in the subject line.