Finance director warns of tightening budget as 2025 revenues soften

Finance Director Archer told the City Council on Aug. 12 that the city’s midyear financial report shows modest revenue declines compared with 2024 and that expenditures remain largely in line with the adopted budget, though some areas warrant close monitoring. “Concerned that we might be facing a cliff,” Archer said, adding that revenues are “only down slightly” but that the picture is tightening for the second half of the year.

The report showed a general-fund reserve at about 46% of operating expenditures, which Archer described as meeting the city’s fund-balance policy for the current year. He cautioned the council that the analysis is a snapshot for 2025 and that the city’s reserve policy evaluates the current year, a two-year budget and a 10-year model.

Archer highlighted sales tax as an area of relative strength: the city’s overall sales-tax receipts were up about 2.8% year to date, above a 2% projection. He said growth is being driven by wholesale and e-shopping categories while traditional sectors such as supermarkets, hardware, cable and liquor continue to decline. On restaurants, Archer said full-service dining is flat while limited-service (takeout/fast casual) has grown.

On the expenditure side, Archer said the city has placed monitor lights on services and charges tied to tariff and inflation impacts, and is watching the second half of the year closely given federal and state-level uncertainty. Capital projects, he said, are “returning to normal” in the sense that double-digit cost escalation has leveled but not returned to pre‑inflation prices.

Water and wastewater revenues started slowly, Archer said, with water usage down and wastewater revenue tracking low after a dry December last year. The city also placed a monitor light on risk management after early-year claim payouts, but staff expects that to normalize.

Archer described investment returns on city-managed assets at roughly 2.94% and an outsources portfolio return of about 4.16%, noting the city’s investment policy prioritizes safety and liquidity and limits internal maturities to a two‑year horizon. He also updated the council on grants, saying the city had awards this year that include a parks grant (~$750,000), a police grant (~$417,000) and public works grants (~$736,000) while staff reported being turned down for a little more than $3 million in other grant requests.

Council members asked clarifying questions during the presentation, including how online purchases are taxed (Archer: “Same sales tax no matter what. If you live in Arvada and it's delivered to your address, you pay the same as if you were to drive to that store.”) and whether recently listed grants were paid or pending (Archer: pending, but he said the city expects the awards to be honored). Archer closed by noting staff will bring the longer budget-season materials next month.