Finance director forecasts roughly $9.3 million in city sales tax; council asks staff to monitor state policy risks

Finance Director Scott Larson told the Gig Harbor City Council that his new sales‑tax forecast projects approximately $9,300,000 in 1% sales‑tax collections for the year, a figure he described as roughly $379,000 higher than the number in the city's budget.

"My forecast is that the city will collect about $9,300,000 in sales tax," Larson said, explaining he used historical data, seasonality and a forecasting model that produced an 80% confidence interval (roughly $8.5 million to a bit over $10 million). He said the model performed within about 3% when back‑tested on prior months, giving him confidence the approach provides useful guidance for budgeting.

Larson reported year‑to‑date collections of about $2,800,000 and said April produced roughly $669,000 (April is typically the city's lowest month). He reminded council there is about a two‑month lag in sales‑tax reporting, so April figures reflect activity from February.

Larson broke collections down by NAICS sectors on a six‑month rolling basis and noted some shifts: information technology up slightly while wholesale trade, food service and construction were down in the period cited. He also presented ZIP‑code breakdowns of payers, showing a mix of taxpayers whose filings are attributed to Gig Harbor ZIP codes, other Washington ZIP codes and out‑of‑state/international filers.

Council members asked how pending state policy changes might affect local revenues. Council member Martin and others referenced a recently enacted public‑safety sales tax distribution and a proposed state 'millionaire' tax that could change which retail items are taxed. Staff said the city is still trying to resolve county allocations of one portion of the public‑safety sales tax and that some statewide mitigation funds discussed in legislation have not yet been established. "That fund was not set up though through the legislation," a staff member said, noting intergovernmental coordination was ongoing.

Larson also discussed how online deliveries factor into local receipts under post‑Wayfair rules: when a purchase is delivered to an address in the city, the city may collect sales tax on that sale, which could increase local revenues and affect annexation financial analyses.

On process, Larson said staff will provide a budget schedule to council in early June and aim to deliver a draft budget to the mayor in August for council review beginning in September, with adoption targeted for the last November meeting. He said sales tax is the city’s largest single revenue source for general operations and that staff will continue monitoring macroeconomic and legislative risks as the budget is prepared.

What happens next: staff will share a budget schedule with council in early June, continue monitoring collections and policy developments, and include the sales‑tax forecast and supporting tables in upcoming budget materials.