Shortly after Gov. Bob Ferguson gave his State of the State address to mark the start of the year and a new legislative session, Thurston County leaders gave a localized State of the Community address.
The event was hosted by the Thurston County Chamber of Commerce on Wednesday, Jan. 14, at St. Martin’s University.
Representatives from Thurston County and five local municipalities — Lacey, Yelm, Tenino, Tumwater and Olympia — shared their accomplishments and challenges of 2025 and their plans for the coming year.
Thurston County
Among Thurston County’s biggest accomplishments in 2025 were passing a comprehensive plan on time, and navigating an estimated $36 million deficit in the biennial budget.
When County Chair Tye Menser first took office seven years ago, the county was eight years behind on its previous comprehensive plan update.
“So we’re pretty proud to be one of the only jurisdictions in the state to get ours done on time,” Menser said. “There was tremendous community engagement effort behind this from county staff and a lot of innovative policy items embedded in the plan.”
Regarding the biennial budget, Menser commended his colleagues for slashing an initial $36 million gap down to just $9.8 million in cuts, and for finding creative ways to minimize the community impact of those cuts.
“Folks don’t always realize how difficult this can be,” Menser said.
The Thurston County Board of County Commissioners passed the county’s 2026-27 budget in a contentious 3-2 vote in December, with the dissenting voters citing concerns about a lack of transparency throughout the process and a lack of clarity in the budget documents.
Elected county leaders, including judges, the prosecutor, sheriff, coroner, clerk, auditor and treasurer, all had their own opinions on the budget, Menser said.
“If they don’t like the budget numbers they get from the commissioners, we hear about it. You hear about it,” Menser said.
Other infrastructure accomplishments made by the county in 2025 include the purchase of six buildings in downtown Olympia for a future county facility, purchase of a new Thurston County Sheriff’s Office headquarters, expansion of the county’s Behavioral Health and Justice Support Center, opening a new Elections and Ballot Processing Center, and securing funding for a Thurston County Fairgrounds expansion.
“What does 2026 have in store? I don’t know, and I don’t have any time to tell you if I did know,” Menser said at the end of his 5-minute time slot. “But the Board of County Commissioners is committed to working every day to continue to advance our county’s values of a healthy environment, a strong local economy, and a safe, inclusive and welcoming community.”
Lacey
Lacey, like many communities, is navigating a period of economic uncertainty, rising costs, shifting revenue patterns and the effects of state and federal actions.
“We’re feeling it as well as everybody else, but I’m proud to say that Lacey is meeting these challenges head-on with careful planning, fiscal discipline and a clear vision for where we’re heading,” said Deputy Mayor Malcolm Miller.
At the head of this vision, Miller said, is the idea that strong businesses, strong neighborhoods and strong partnerships lead to strong cities.
Supporting small businesses is a key pillar of this vision.
“Our goal is really simple: make it easier to do business in Lacey, and help businesses grow,” Miller said.
The City of Lacey supported small businesses in 2025 through several programs and initiatives, including the Business Retention and Expansion Program, which the city plans to continue in 2026.
The city also wants to build on the success of the Food Truck Depot and Night Market, and has funded a feasibility study to find the popular event a permanent location.
Another goal for 2026 is to continue work on annexation.
The City of Lacey identified 15 subareas of its urban growth area for annexation and signed an interlocal agreement with Thurston County in 2025.
The City of Lacey will also begin implementing the five-year economic development strategy that the city developed last year.
“The first year is all about laying the groundwork, putting the right tools and partnerships in place, and then building momentum off of that,” Miller said.
One of the key steps is to reestablish the city’s Foreign Trade Zone, which makes it easier for local companies to engage in international trade.
Yelm
Like its neighbor to the north, the City of Yelm is in the process of annexing a large portion of its urban growth area to keep up with the city’s growth.
“Yelm has been among the fastest growing cities in Washington state, with more businesses, jobs and revenue,” said Mayor Joe DePinto.
The city entered into an interlocal agreement with Thurston County for the annexation in 2025, and also negotiated the transfer of a portion of the popular Yelm Rainier Tenino Trail from county to city ownership.
The ongoing growth has brought economic development to Yelm, “but it also exposed decades of underfunded infrastructure and insufficient maintenance budgets,” DePinto said.
Reflecting on his first four-year term as Yelm’s mayor soon after he was reelected to a second-term, DePinto said the City of Yelm has been focused on “addressing those gaps, prioritizing critical projects, (and) using partnerships and creative funding to get things done.”
Now, DePinto said, the City of Yelm “is a stronger city organizationally, more connected regionally, and steadily improving capital improvements and maintenance plans.”
Expenditures for 2025 came in 10% under budget, increasing the city’s general fund revenue by more than $4,000, according to DePinto.
The City of Yelm still faces challenges related to funding capacity and growth management, “but we have momentum,” DePinto said. “We have dedicated teams, supportive partners and an engaged community.”
Tenino
Mayor Dave Watterson received a round of applause as he announced that, for the first time in several years, the City of Tenino received a clean audit for 2024.
He called the accomplishment “one of the most significant” in his two years as the city’s mayor.
“A clean audit is not the finish line. We are now building a long-term financial plan to restore reserves and align services with sustainable revenues,” Watterson said.
Going back to 2021, before Watterson was mayor, budget misreporting issues resulted in the city’s budget expenditures outpacing budget revenues by an estimated total of $1.4 million. This led to the city spending an estimated $1.3 million from restricted sewer and water funds for other city expenses, as previously reported by The Chronicle.
Because it’s a violation of state law to use the restricted funds on non-fund related items, the city council had to retroactively approve use of the funds as an interfund loan.
The city must now pay back the loan to the sewer and water funds within the next three years at a 4% interest rate for a total of approximately $1.8 million.
However, the City of Tenino is still growing its local economy.
The city in 2025 celebrated the opening of the first two businesses at its new Agricultural Innovation Park, and is closing in on the development of a widely anticipated regional meat processing facility.
The city also used a private foundation grant to double the size of its community park and secured funding to repave a major roadway. The work on that repaving project began in 2025, with phase two starting in 2026.
“Tenino operates on a very small scale, but we have been able to accomplish a great deal by being disciplined, focused and collaborative,” Watterson said.
Tumwater
Newly-elected Mayor Leatta Dahlhoff asked event attendees to remember three main points of her presentation about her city — aside from the fact that she didn’t throw up from nervousness.
“In Tumwater, we’re going to turn up the energy, we’re doing some really cool projects, and we’re moving forward together,” Dahlhoff said.
She clarified that “together” doesn’t just include Tumwater staff and residents, but community and business partners and neighboring jurisdictions, as well.
“Our baseline in Tumwater is we care about people, we care about our environment, and we’re going to continue to do that today and tomorrow by leading with innovation and adapting and updating how we serve our community,” Dahlhoff said.
A recent example of work Dahlhoff wants to continue in 2026 is the establishment of the Tumwater Fire Mobile Outreach Team — a partnership between Olympic Health & Recovery Services and the City of Tumwater to provide 24/7 behavioral health crisis response services in the city.
The City of Tumwater is also continuing work on an environmental impact statement for the old Tumwater Brewery, and is working with state Rep. Beth Dolio, D-Olympia, on legislation related to the project.
Other work Dahlhoff wants to continue in 2026 is establishing a city equity commission to identify equity issues specific to the Tumwater area and work to address them.
“I think that’s really, really exciting, because it’s not just words. We’re taking action,” Dahlhoff said.
Dahlhoff also wants to continue work on the city’s habitat conservation plan, which will aim to balance the need for green spaces with economic growth.
“For me and all of us at Tumwater, sustainability means your current environment, community health and economic vitality, they all go hand in hand,” Dahlhoff said.
Olympia
Financial stability, supporting local businesses and addressing housing and homelessness were top priorities for the City of Olympia in 2025, according to Mayor Dontae Payne.
The city made “important choices, sometimes difficult ones,” regarding those issues last year, Payne said.
“I’m so proud to report that despite our challenges, the City of Olympia is strong,” Payne said.
Like Thurston County, the City of Olympia faced a budget gap this budget cycle, and had to put in extra work to balance the budget.
“We responded with a balanced approach that protects our core services while supporting economic vitality,” Payne said.
A key part of that approach was reforming the city’s business and operations (B&O) tax to increase the number of gross receipts a business can have before owing taxes.
At the same time, Payne said, the city expanded B&O tax revenue from larger businesses, which allowed the city to address its budget gap.
The city ultimately made $1 million in cuts to help close a $6 million deficit in its 2026 budget.
Those cuts will not impede the city’s ongoing work on capital and economic improvements, however.
The city secured state funding in the 2025 legislative session for several critical capital projects, including the Deschutes Estuary Project, the Hands On Children’s Museum expansion, a regional animal shelter and the Harlequin Theater.
The city is also hiring a contractor to conduct an economic analysis of the city and gather info from community interest groups in the wake of a Worker’s Bill of Rights that failed on the November ballot.
Additionally, the city is continuing work on its housing action plan. City staff will begin work with the county this year on a regional plan to address The Jungle in Olympia, with a goal of closing the encampment in phases.
