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City officials flag midyear sales-tax decline, discuss land-sale proceeds and public-safety reserve
Summary
City finance staff reported a year-to-date sales-tax decline and reviewed June financials, proposed using upcoming land-sale proceeds to shore up fund balance and diverting unused public-safety sales-tax dollars into a facility reserve.
Susan, a city finance staff member, told the commission the city’s year-to-date sales-tax collections through June showed a “negative 3%” trend and that retail sales — the city’s primary driver of sales-tax revenue — have been volatile in recent years. “Unfortunately, it doesn't look very good,” she said.
The report matters because sales taxes fund infrastructure and other near-term city needs; Susan noted the decline mirrors regional softness concentrated in the eastern part of the state and cited an external tax-commissioner article. She said hotels and food service have generally shown growth but retail has been the primary source of the variability.
At the meeting, staff reviewed month-of-June General Fund financials showing revenue and expenditures both below budget in June, with cash-flow timing issues tied to when taxes are received. Susan reported a midyear pickup in July and said, on a projection that includes expected land-sale proceeds, the city would show roughly $5.5 million in net revenue over expenditures — driven by an unbudgeted land sale.
City staff proposed allocating most of the anticipated land-sale proceeds to the general fund balance and directing roughly $1.2 million of the net to the solid-waste fund for future land needs. "My suggestion is that we bring 5.5 into the general fund for our fund balance, and then we put 1,200,000 to solid waste," Susan said.
The commission also discussed the public-safety sales tax. Susan and other staff described that a planned 2025 use of those funds to hire firefighters did not occur because of a change in fire leadership and training timing, and Fire now asks that the unspent funds be placed in a public-safety sales-tax reserve for future facilities work. Susan said staff supported moving the unused 2025 public-safety sales-tax monies into that reserve rather than bringing them into the general fund with no corresponding 2025 expense.
Commissioners raised broader revenue-policy questions. One commissioner recommended exploring elimination of the sales-tax cap that exempts certain large purchases, saying the city could pursue a ballot measure to consolidate sales tax and remove the cap; another noted the political and legal constraints — including an existing diversion and other dedicated taxes — that complicate new tax proposals.
Staff also reminded commissioners that recent state actions — a new state cap on growth (described in discussion as a state "3% cap") and a state property-tax credit program — could affect cash flows and reserve planning, and that the credit program may delay some revenue receipts to the city because the state will remit its share after calculating credits.
The discussion produced no formal vote on tax policy. Staff said they will continue monitoring collections, finalize land-sale estimates, and bring formal budget amendments and recommendations (including the proposed allocation of land-sale proceeds and the public-safety sales-tax reserve transfer) to the commission in future agenda items.
