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Spokane staff warn sales-tax volatility and a sharp drop in construction-related receipts complicate budget planning
Summary
City staff told the council that month-to-month sales-tax volatility and a reported 16.3% year-over-year decline in construction-related sales tax are making revenue forecasting for the biennial budget difficult; staff said they are working with the Department of Revenue for more granular data.
City staff presented a revenue outlook that emphasized unusual month-to-month volatility in sales-tax receipts and warned that modest nominal growth is being outpaced by inflation, producing an inflation-adjusted revenue decline.
The presenter highlighted that in 2025 monthly outcomes ranged from strong positive to significant negative swings and that annualized sales-tax growth for the period was roughly 0.65–0.75 percent. "If you take the point seven and you compound that with the three percent (inflation) reduction, you're actually losing on a year-over-year basis," the presenter said.
Staff also said their analysis identified a 16.3 percent year-over-year decrease in sales tax tied to construction activity and that they are in continued conversations with the state Department of Revenue and with Steve McDonald in city staff to obtain more detailed breakdowns of those numbers. Council members and staff noted reduced permit activity and developer caution as possible contributors to the decline.
Administration staff said they have already moved to restrain expenditures and expect the finalized biennial budget process to yield a position that is "pretty close" to balance, possibly with a small surplus. Staff outlined the schedule for the six-year capital program and the operating-budget calendar: further study sessions in the summer, a preliminary budget in October, the mayor’s proposed budget in November and final adoption by December.
What happens next: staff will seek more granular sales-tax and permit data from the Department of Revenue, refine revenue projections for council review in upcoming study sessions, and present proposed budget assumptions to guide outreach and deliberation.
