Kingston finance director warns sales-tax volatility could strain 2026 budget

The City Controller told the Finance and Audit Committee on May 2025 that monthly sales-tax receipts swung sharply early this year and that the city’s general fund balance dipped after planned withdrawals last year.

“February’s down almost 23%. March was up 12.64% over the prior year,” the Controller said, illustrating the month-to-month volatility that leaves the 2025 sales-tax budget at risk. He added that year-to-date the city was “down 4%...we’re down $200,000.”

The Controller said the city budgeted modest growth for sales tax in 2025—about a 1% increase over what was collected in 2024—and that the recent swings make predicting full-year results difficult. He told committee members that while cash flow and immediate liquidity remain sound, several forces could tighten budgets in 2026, including growing debt service tied to recent infrastructure projects and new contracts.

The Controller reviewed a fund-balance history going back more than a decade and said the general fund balance fell to 16.29% after the 2024 fiscal year. “Our policy says 13 to 20. That’s our target range,” he said, noting that the city used about $2,000,000 of fund balance in 2024 for capital and other one-time costs. He added the use of fund balance helped avoid borrowing interest costs by paying some projects on a pay-as-you-go basis.

Committee members asked about federal and state grant clawbacks and cannabis tax reconciliation with the county. The Controller said he was not aware of any grant clawbacks and that county and state staff were investigating an allocation issue for cannabis sales-tax revenue; he described the disputed amounts as budgetarily small but important to reconcile.

The Controller recommended cautious spending and offered one-on-one briefings for council members. He told the committee the city remains in “good fiscal standing” but that “from a budgetary standpoint, I certainly see pressure…for the next few years,” largely tied to debt-service obligations and uncertain sales-tax trends.