San Marcos discusses declining sales tax and property values for fiscal year 2026

The San Marcos City Council held a work session on May 20, 2025, focusing on the city's sales and property tax revenues. The meeting highlighted a concerning trend in sales tax collections, which have decreased by 2.3% from January to December 2024 compared to the previous year. The city experienced its lowest sales tax point in September 2024, with a decline of 3.3%. Recent data shows a slight recovery, but April 2025 still recorded a 2.8% decrease.

City officials discussed the importance of using a rolling 12-month average to better understand sales tax trends, as it accounts for monthly volatility. Comparisons with peer cities revealed that while San Marcos's sales tax is down 1.2% year-to-date, regional averages have increased by 3.8%. The council acknowledged the need for clearer explanations regarding the selection of peer cities for comparison, emphasizing the importance of shared characteristics such as university presence and municipal utilities.

The discussion also covered the city's top ten sales tax contributors, which have collectively decreased by approximately $500,000 compared to the same period last year. Notably, the largest taxpayer in wholesale trade has seen significant declines, although officials anticipate stabilization in the near future.

Transitioning to property tax, the council reviewed assessed values and taxable values, noting a projected decline in taxable value for fiscal year 2026 of 2.2%. This decline is attributed to a decrease in existing property values, with insufficient new property additions to offset the losses. The council highlighted that while new property taxable value added in 2026 is expected to be $267 million, it is not enough to compensate for the overall decline in property tax revenue.

In conclusion, the meeting underscored the challenges San Marcos faces with declining sales and property tax revenues, prompting discussions on strategies to stabilize and improve the city's financial outlook moving forward.