Flagstaff trims retail and hotel revenue forecasts, keeps overall growth outlook for budget planning

At a Flagstaff City Council budget retreat April 24, city budget staff reported a modest overall revenue outlook for fiscal planning while flagging weaker near-term retail and hotel collections that prompted modest downward adjustments to some categories.

Rick Tatter, management service director, told the council the city is “trending at about 2 and a half percent growth in our general fund sales tax.” He said data through March showed retail and marketplace returns that declined in January and prompted a small downgrade in that projection, and that hotel occupancy collections have fallen roughly 2% year over year in recent months.

The city also raised its estimate for state-shared revenues after stronger January through March returns, which Tatter said pushed that line toward a higher year-over-year gain than previously expected. “Auto loo, which is our vehicle registration taxes, that we get from the state, through shared revenues, have been very strong year over year,” he said, adding that the team is projecting stronger state-side growth than they had earlier.

Why it matters: revenue assumptions drive how much the city can commit to personnel, capital projects and reserves. City staff told council that they had changed their recession planning approach for the current budget process — using a flatter multi-year assumption instead of automatically budgeting a 3% downturn — so more one-time and ongoing compensation commitments could be included while keeping recession-response tools available.

Supporting details: staff emphasized continued uncertainty in the broader economy. Tatter cited tariffs, possible federal and state tax changes and consumer confidence as variables that could alter receipts. He said construction-related sales tax slowed in recent months but remained a meaningful contributor; the budget team treats permit-related construction revenue conservatively, using a baseline around $2,000,000 a year rather than higher short-term peaks.

Council members asked for context about statewide comparisons and noted the city’s diverse revenue mix. A council member thanked the city manager and budget team for “anticipating and planning,” and staff said they will monitor monthly returns and bring adjustments to council if significant swings occur.

Staff did not present or take any formal votes at the retreat on revenue changes; the figures discussed were the basis for the city manager’s recommended budget and will be revisited as part of the formal adoption process.

Ending: Tatter said staff will continue monthly monitoring and bring material changes back to council in subsequent budget briefings. “If we see some major changes, we will definitely have some conversations about that over the next several months,” he said.