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Staff outlines modest economic outlook for 2026; property tax remains primary revenue driver
Summary
City finance staff told the Finance Commission the 2026 outlook is steady, with property tax as the largest general-fund source and a conservative 2% sales-tax growth assumption; staff also plans a spring fee/charges study to inform the budget.
City finance staff presented an economic outlook to the Finance Commission on Nov. 20 as the work that will form the foundation of the 2026 budget.
Nick, who led the presentation, said staff uses conservative, long-standing data sources and local consultants to project revenues. He told the commission property tax makes up roughly 40% of the general fund and is the city's most stable revenue source, while sales tax accounts for a much smaller share (roughly 13%) and is therefore more elastic.
"Property tax is about 40% of our general fund," Nick said, describing property tax as a lagging, predictable source that helps with multi-year forecasting.
Staff projected a conservative 2% growth in sales tax for the coming year and signaled an expectation of 3'5% increases in general fund revenues overall under current assumptions. Commissioners asked for updated forecasts as the budget process advances and for budget-to-actual reporting during the midyear and monthly cycles.
Nick said staff will perform a fees-and-charges review in spring 2026 to ensure cost recovery where appropriate and will bring the results to the commission before forwarding recommendations to the city council as part of budget adoption.
Commissioners and public commenters pressed staff to be realistic about the city's limited reliance on sales-tax-generating retail; one public speaker urged staff and council to avoid treating South Pasadena as a sales-tax-dependent jurisdiction and to consider the types of retail that actually generate tax revenue.
Staff said grant funding is competitive and uncertain, so the city does not build capital grants into its operating budget until awards are confirmed. The commission will receive quarterly updates from consultants and a refined revenue forecast as work on the budget continues.
