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Finance director reports mixed revenues; sales tax remains key indicator
Summary
At the Aug. 12 council meeting Finance Director Groome reviewed the city’s June financials, reporting real estate excise tax and several other revenues varied month-to-month while sales tax — the single most important indicator — trended slightly under budget year to date.
The City of Federal Way’s finance director presented a midyear snapshot Wednesday showing mixed revenue performance and reaffirming the city’s approach to manage the budget by monitoring revenues and holding a waiting list for nonessential projects.
Director Groome (Finance) told the council that property taxes are tracking on budget because levies are collected predictably, while real estate excise tax (REET) had dipped in 2023 and 2024 but showed a year-to-date uptick in June. “When the real estate excise tax revenue falls short, that means that we have to defer the timing of the projects,” Groome said, noting REET is restricted to capital uses.
Groome described utility taxes and lodging taxes as favorable to prior year and said interest revenue was a little under budget after spending down cash early in the year, but high federal interest rates had helped returns. He said permit fee revenue remained unpredictable because it depends on project timing.
On sales tax — the city’s largest and most closely watched revenue — Groome said the city was roughly 3.5% unfavorable to budget year to date but about even with last year. He noted the most recent months had been better than the same months the prior year and called sales tax “the most important indicator for our underlying economy and our budget.”
Groome told council members the city maintains a waiting list of capital projects that can be prioritized if revenues improve. He described current management as vigilant but not alarmist: the city has levers to “course correct” if necessary and remains mindful of existing obligations.
Council discussion covered several follow-up items: Councilor McDaniel asked about the impact of a new state tax on services on the city’s sales tax take; Groome said most of the new tax goes to the state but that the city’s portion will increase modestly. Council members asked for updated interest projections and a farmers market financial snapshot; Groome agreed to provide updated numbers at the next FedRack meeting and to circulate a market update by email.
Decision/Direction: The presentation was informational; council requested follow-up details on interest revenues and a farmers market financial update and affirmed continuing monthly revenue monitoring.
Quotation from the meeting • Finance director Groome: “There is no more important indicator for our our underlying economy and our budget than sales tax.”
