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Anacortes finance director: sales tax and permit revenues softened; council urged to study long‑term revenue options
Summary
Finance director Steve Hoglund told the council Jan. 21 that several key revenue streams — cumulative sales tax, building permits, and impact‑fee collections — are down compared with recent years, leaving the city relying on reserves and transfers. Council members and public commenters urged a retreat or workshop to develop revenue strategies.
Steve Hoglund, the city’s finance director, presented a Jan. 21 update showing mixed results across the city’s primary revenue streams and urging council attention to longer‑term trends.
Hoglund told councilors that cumulative sales tax for 2024 was below 2023 collections (a year‑over‑year decline he described as a continuing trend), building permit revenue fell to about $298,000 for the year, and the city collected roughly $113,000 in combined impact fees in 2024. He said real‑estate‑excise‑tax (REIT) balances will leave the city with an estimated $3.4 million in REIT cash after planned year‑end transfers, and he estimated roughly $1.0 million in REIT transfers into capital funds to support 2025 projects.
Hoglund explained property tax variances to council, saying 2024 budgeting was complicated by a voter‑approved Proposition 1 change to the levy rate and that his 2024 estimate on assessed values had been off. He described property tax levy calculation as ‘‘budget‑based’’ and therefore not directly proportional to assessed value increases.
Councilors and staff discussed the composition and timing of transfers into the street maintenance and construction funds. Hoglund said the street maintenance fund showed a roughly $500,000 negative balance before transfers and that he expected to use REIT transfers (and other identified transfers) to cover the gap. Councilmember Walters urged that the city prefer more restrictive grant monies when available and consider quarterly reconciliations of transfers to provide clearer year‑end positions.
Public comment highlighted financial concerns. Shiwa Moo, an Anacortes resident who reviewed publicly posted contracts and budget documents, raised questions about long‑term reliance on one private consultant and potential impacts on transparency and institutional memory. Moo told the council: "Long‑term reliance on private consultants have issues — potential compromising of transparency, excessive dependence on the consultant, and project creep." The resident urged building more in‑house capacity.
Several council members called for a deeper, council‑level review of revenue strategy. Councilmember Clellan McGrath asked that this year’s budget retreat or a separate workshop focus on revenue options, citing permit declines and their downstream effect on impact fees and sales tax. Councilmember Walters emphasized that sales tax grows with economic activity and argued the city needs to shift some reliance from property tax to sales tax over the long run.
Ending: Hoglund said he will return with more detailed reconciliations and, if council directs, a quarterly reconciliation approach for capital transfers. Council members requested additional breakdowns (for example, permit unit counts by category from planning staff) and a briefing from the county assessor on property tax mechanics before the next property tax cycle.
