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February sales tax down 5%; finance staff warn of constrained budget runway
Summary
City finance staff reported a roughly 5% decline in sales tax remittance for February and identified volatile use‑tax receipts as a contributor to year‑over‑year variation. Staff said the decline reinforces the need to reconsider requests for budget increases and to slow hiring of vacant positions as the city prepares the FY26 budget.
City finance staff told the Finance Committee on Feb. 20 that February sales tax remittance was down about 5% and that the drop — if sustained — will constrain the city’s budget outlook going into the FY26 process.
The finance director (unnamed) said “the February sales tax remittance was not positive. It was about minus 5%,” and cautioned committee members that the pattern could limit available increases for outside agencies and departmental requests. The director noted that although some months recently set revenue records, operating costs and payroll continue to grow and the city must weigh those pressures against new spending.
Use‑tax volatility: staff said year‑over‑year comparisons are affected by one‑time use‑tax events. The director referenced a large, one‑time use‑tax payment tied to NextEra (power‑project equipment deliveries) in the prior year that will not recur, and noted that use tax can be driven by large project deliveries rather than typical consumer spending.
Budget implications and next steps: staff recommended slowing the rate of hiring for vacant positions and carefully reviewing requests for new full‑time positions and outside agency increases. Committee members asked for a clearer list of budget drivers that could materially close the projected shortfall; staff said they would present options as part of the manager’s proposed budget. The committee also discussed transit funding and the micro‑transit pilot; staff said city transit is funded in part by federal sources and a voter‑approved local tax and that discussions about an RTA (regional transit authority) vote are anticipated in 2026.
Ending: No formal budget decisions were made at the meeting. Staff told councilors they will continue to update revenue forecasts and present trade‑offs for the FY26 budget deliberations.
