City finance staff: general-fund revenues lagging, expenses offset variance so far

City finance staff told the City Council Finance & Administration Committee that general-fund revenues are running modestly behind plan through the first half of the year, while department underspending has so far reduced the impact. Jessica Stratton, a city staff member who presented the second-quarter variance report, said the report compares “year to date budget to year to date actuals. It is not a projection.” She and staff emphasized that accounting practices (cash versus year-end accruals) make midyear comparisons different from final results. The nut graf: the city’s general fund had received roughly 40% of the annual budgeted revenues through June and shows a 1.1% unfavorable variance on revenue and a 1.8% favorable variance on expenses. Staff told the committee that a large, predictable inflow will arrive in November when the second-half property tax distribution lands. Staff flagged a few principal revenue drivers: sales tax receipts are underperforming budget and year-over-year, property taxes are below budget apparently because of rising exemptions for nonprofits and seniors/disabled accounts, and utility taxes are trending unfavorable in part because of lower summer water use and a private utility (Avista) rate change adopted after the budget. Stratton said that when transfers in are removed from the calculations, year-over-year revenue growth falls from roughly 3% to about 2%. On the expense side, police departments and several other departments are running well under budget year-to-date, in part because of vacancies and timing of programs; Spokane Fire is above budget due to overtime tied to recruit academy timing. The committee heard that the city’s unaudited 2024 unappropriated fund balance is about $7 million but that it is roughly the same size as the difference from reserve targets and that leadership will need to decide strategy. Staff also noted risk areas: insurance-type funds (risk, unemployment, workers’ comp, employee benefits) have experienced sustained claims and will likely require supplemental budget ordinances for 2025; premium increases are expected in 2026. The report includes a separate CIP status update (about 500 projects) and an economic indicator section showing taxable sales (two months in arrears) down 1.41% through April. Council members asked staff for clarifying monthly year-to-date tables, more detail about property-tax exemption drivers, and for follow-up information about specific departmental lines such as youth commission spending and police overtime projections. Finance staff said they are preparing mid-biennial adjustments to reflect the pattern in revenues and spending.