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Peoria mid‑year review: officials see revenue improvement, urge cautious spending
Summary
City finance leaders told council Dec. 17 that the local and national economy have improved since mid‑year, prompting modest forecast upgrades but counselled prudence amid uncertain longer‑term state revenue shifts.
Peoria’s finance staff told the city council on Dec. 17 that improved economic indicators and stronger‑than‑expected early fiscal‑year sales tax receipts have allowed modest increases to revenue forecasts but that the city should remain cautious because some state revenue sources will decline in the next two years.
Deputy City Manager Kevin Burke, CFO Sean Kendall and Deputy Finance Director Peter Christiansen presented a mid‑year review that updated council on national and local trends, sales‑tax performance, state shared revenues and multi‑year budget capacity.
Kendall summarized the macro picture: following recent indicators, “most economists ... are comfortable in saying that we either have already achieved a soft landing or are about to achieve the soft landing,” and inflation has trended closer to the Federal Reserve’s 2% goal. Christiansen told council that two‑thirds of Peoria’s general fund depends on three elastic revenues — city sales tax, state‑shared sales tax and state‑shared income tax — making the city sensitive to economic swings.
Finance staff reported positive early fiscal‑year sales tax results: July–October year‑over‑year growth averaged about 9%, prompting an upward revision to the current year forecast from flat to roughly 2% growth; staff said they would revisit the estimate if the strong trend continues. Staff also highlighted changes in state shared income (urban revenue sharing): collections peaked around $52 million and are expected to decline to roughly $42 million then below $40 million over the next two years due to tax changes and timing, a dynamic staff has planned for in the forecast.
The presentation listed several key assumptions and pressures: the residential rental tax phase‑out will reduce the general fund by about $3.3 million and citywide by about $5.5 million; the city is budgeting continued merit increases for employees; and ongoing operating costs tied to capital projects are included in multi‑year projections. Christiansen said Peoria has ongoing capacity in the forecast, with roughly $8 million of capacity in early years of the five‑year model but characterized that as roughly $2 million per year of sustainable, new ongoing spending after annualization.
Staff recommended conserving resources for capital priorities: projected capacity in the half‑cent sales‑tax fund was shown at about $3.3 million in FY 2026 rising to $5.5 million later in the forecast and staff advised preserving that capacity for major economic development needs. Officials also noted growing interest income from higher short‑term yields and said a utility rate study will return next year to address water/wastewater capital demands.
Ending: Finance staff asked council to maintain conservative budgeting and confirmed the department will bring the FY 2026 recommended budget to council in March after departmental submissions and management deliberations in January and February.
