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Keller projects largely flat revenues for fiscal 2026 as sales tax and interest income stabilize
Summary
Finance staff briefed council on general‑fund revenue trends and a conservative outlook for fiscal year 2026: property tax projections stable under a no‑new‑revenue scenario; sales tax expected to remain flat after a period of growth; interest income forecast to taper from recent highs; and permits, franchise and interlocal
City staff presented the general fund revenue outlook for fiscal year 2026, telling council the city is planning conservatively because sales tax and interest income — the most volatile revenue lines — have begun to level off after recent highs.
Key points from the presentation: - Revenue mix: the city’s general fund is concentrated in a small set of revenue sources. Staff said roughly 93% of general‑fund revenue is captured by property tax, interlocal agreements, franchise fees, ambulance fees, permits, interest and sales tax. Property tax remains the most stable source. - Sales tax: staff said sales tax growth has flattened after earlier gains and May checks showed a slight month‑to‑month decline; for budgeting purposes staff expects sales tax to be essentially flat in 2026 and built a conservative projection into the draft budget. - Interest income: interest earnings climbed markedly in 2023–24 as short‑term rates rose. Staff said that income will taper in 2026 as CDs and money market yields step down, and that the city has a cushion from previously locked‑in higher rates but should budget lower going forward. - Permits and ambulance: permit revenues have leveled at about $1 million annually after development spikes in earlier years; ambulance revenues increased in 2024 and staff used a conservative averaging approach for 2026. - Interlocal contracts and franchise: staff expects interlocal contract revenues (regional contracts) to rise modestly based on contract terms. Franchise fees are seasonally sensitive (gas/electric) and were budgeted using a normalized, multi‑year view.
Staff summary: overall, the 2026 general‑fund budget includes a small net increase from the adopted 2025 budget — about $80,000 — but staff’s year‑end projection for 2025 is slightly above budget. The forecast assumes a continued no‑new‑revenue property‑tax posture on the general tax rate and emphasizes close monitoring of sales tax and interest income.
Next steps: staff will refine revenue estimates as more data arrive and will present detailed budget proposals and options in upcoming budget work sessions.
