City staff told the Arlington City Council that retail sales tax revenue was running about 4% below the prior year through June, leaving a roughly $324,000 shortfall compared with the previous year’s collections for the July 2024–June 2025 period. Paul, a city staff member presenting the June financial report, said the city had budgeted on continued sales‑tax growth but that the current trend required action to preserve the general fund.

Staff said building permits remain low and that transactions counted in REIT 1 and REIT 2 have declined as housing sales slow. “We’re seeing a 4% downward trend,” Paul said. He warned that cities more dependent on these funds for debt service are beginning to feel a pinch, although city staff said Arlington has a buffer in those funds and has not recently added major new debt.

To limit near‑term fiscal damage, staff proposed deferring new hires programmed for 2026; Paul said postponing those hires would address roughly 65–70% of the projected shortfall without involuntary layoffs. Councilmembers praised prior conservative budgeting and asked staff to present options for 2026 budget adjustments in October. Paul said he would not propose permanent cuts now but would recommend temporary measures until revenue improves.

Councilmembers asked for clearer presentation of the sales‑tax charts. Paul explained the negative 4% number reflects total collections for the year compared with the prior year, and noted new businesses are still generating receipts (about $312,000 in the most recent period), while existing businesses are producing a net decline estimated at $636,000. No formal budget amendments were adopted at the workshop; staff said they will return with specific 2026 proposals.