Budget staff presents FY2027 revenue model; sales tax projected up, property tax net declines due to debt service

City budget staff on Jan. 8 presented the initial revenue model that will guide the FY2027 recommended budget and the committee's upcoming departmental hearings. Skye Gerhardt, the management fellow, said the city is forecasting all-funds revenues of $252,700,000 for FY2027, down from $267,400,000 in FY2026, a year-over-year decrease staff attributed mostly to the end of ARPA and other one-time fund-balance uses.

"In fiscal year 2027, we are forecasting $252,700,000 as compared to $267,400,000 in FY 2026," Skye said, and noted the January estimates are intentionally conservative and will be revised as more actuals arrive.

Staff projected general fund revenues at $124.2 million for FY2027 versus $129.6 million in FY2026 (a decrease of about $5.4 million). Skye explained that much of the apparent drop in net property tax flowing to the general fund is the result of assumed higher debt service tied to issuance of a general obligation (geo) bond next month; staff said operations are being "held harmless" by planning to use one-time fund balance and transfers where needed.

Sales tax remains the largest general-fund revenue source; staff forecast local sales tax at $69.9 million for FY2027 (a 2.5% growth assumption based on state projections). Skye noted that sales tax collections in Franklin historically mirror the state and that the model uses a conservative growth rate pending spring updates.

The presentation included several fund-level changes: a projected decline in the water and sewer fund partly driven by ARPA and one-time reimbursements and a minor year-over-year decrease in the sanitation fund tied to a $800,000-plus equipment recognition in FY2026. Staff also flagged large, atypical developer contributions in November that drove a 34% spike in the road impact fund and a substantial one-time increase in parkland fees (about $1.4 million).

On the hotel/motel tax, staff ran a scenario increasing the occupancy tax rate from 4% to 5% and estimated FY2027 revenues of $7.57 million if the increase were effective July 1. The administration said the Board will vote on the proposed change on Feb. 24 and that staff will ask the city attorney whether an earlier effective date is possible.

Committee members asked about producing a concise committee recommendation for the full Board, how federal data gaps from a recent federal shutdown affect forecasting, and how the city ensures impact-fee revenues are reinvested visibly in the areas that generated the fees. Staff answered that a budget development webpage will centralize materials, that anomalies in federal data produce gaps staff annotate in forecasts, and that the CIP and impact-fund budgeting align resources with project timing.

Next steps: departmental hearings begin in February, with two meetings scheduled in both February and March to process program areas; staff will release outside-agency appropriation guidelines around Feb. 1 with a March 1 submission deadline. The administration plans to present a recommended budget in May, followed by public hearings and final readings before June 30.