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Although this tax category accounts for 35% of the City’s General Fund revenue, two key mitigating <br />factors help ensure the City maintain service levels in the event of a recession. First, the City’s sales tax <br />base is spread across a variety of sectors, some of which tend to move in opposite directions. According <br />to the City’s sales tax consultant, in past recession scenarios—such as the COVID-19 pandemic—declines <br />in restaurant sales may be offset from increases in food sales with residents cooking more at home than <br />eating out. Second, the City maintains a strong General Fund Reserve. The City Council adopted a policy <br />to maintain a General Fund balance equal to 18% of annual recurring revenue. For FY25-26, the reserve <br />totals $74.5 million, providing a fiscal buffer that can be used during emergencies or to help sustain <br />operations through economic downturns. <br />The chart below provides the percentage breakdown of the City’s sales tax sources. The largest sources <br />of revenue include those from major industry groups such as General Consumer Goods, Business & <br />Industry, and Autos & Transportation. <br />A ten-year trend of the City’s Bradley-Burns allocation follows. While the overall trend is upward, there is <br />economic fluctuation seen in FY19-20 due to the economic impacts of the COVID-19 pandemic. In recent <br />years, sales tax growth has stagnated, with a flattening trend attributed to lower tax receipts in several <br />key economic sectors. Looking ahead, the imposition of new tariffs is expected to further constrain <br />growth—particularly in sectors such as Autos & Transportation and General Consumer Goods, which are <br />heavily reliant on imported products. As sales growth continues to slow, FY25-26 is projected to show <br />only modest increases, as both consumers and businesses face ongoing challenges related to inflation, <br />rising prices, tariffs, and high interest rates. <br />80