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Sedona staff urges prudence as council hears economic, tourism outlooks ahead of FY‑27 budget
Summary
City staff presented a cautious economic forecast and new tourism data showing mixed hotel demand; they recommended conservative revenue assumptions and a 0‑based review of expenditures while council signaled broad support for holding revenue estimates flat as capital project priorities are re‑evaluated.
City staff told the Sedona City Council on Dec. 17 that a mix of national economic risks and shifting tourism patterns calls for conservative revenue assumptions as the city prepares its FY‑27 budget. ‘‘What we’re seeing is moderate growth nationally but a lot of downside risks — inflation, consumer softness and global headwinds — so GFOA guidance is to be conservative and preserve contingency,’’ Barbara Whitehorn, deputy city manager, told the council.
The economic presentation by staffer Sterling highlighted a ‘‘K‑shaped’’ recovery in which technology and high‑income services continue to perform while low‑income retail and small businesses lag. Sterling said the city’s short‑run forecasts are complicated by data gaps, noting the December Consumer Price Index is not yet available because of a federal reporting lapse; in the meantime staff is using an August CPI of about 3 percent for near‑term inflation projections.
Sterling described Sedona’s investment position, saying the city currently earns roughly a 4.1 percent yield on certain government securities and certificates of deposit, which briefly outperformed the benchmark. He also warned that June–July swings in sales and bed tax receipts were driven by late remittances from lodging providers and recommended viewing monthly tax data cautiously: ‘‘Quarterly is probably the better way to look at this,’’ he said.
Tourism manager Andrew Grossman gave a calendar‑year review showing weaker international inbound travel — Canada was singled out as one of the most impacted markets — while certain luxury lodging segments have remained resilient. Grossman reported that calendar‑year sales tax is up about 2 percent while bed tax is down about 2 percent, and that short‑term rental platforms and online travel agents accounted for roughly 40 percent of bed tax remittance year‑to‑date.
The presentations set the stage for a council discussion about baseline revenue assumptions. Several councilors, including Councilor Dunn, supported a conservative approach. ‘‘I would definitely stay flat or even reduce,’’ Dunn said, citing softening luxury hotel demand and retail trends. Others asked staff to tighten capital‑project prioritization and to return more granular implementation plans in January to narrow the gap between budget and actual spending.
Staff announced a shift toward 0‑based budgeting for FY‑27, with departments asked to justify expenditures line‑by‑line and submit decision packages for additions. The council left the retreat with direction to hold revenue assumptions steady while staffs prepare a prioritized, fiscally cautious set of decision packages and a clearer CIP stop/start list for final consideration in the next packet.
