Item 10 - Fiscal Year 2025-26 First Quarter Budget Update and Proposed Appropriation Adjusments

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FY 2025-26 First Quarter Budget Update and Proposed Appropriation Adjustments December 2, 2025 Page 3 5 4 5 4 corresponding period, and the first installment of property tax payments is not received until late November and December. Early sales tax receipts indicate a modest 2.4% decline from general consumer retailers, including family apparel, specialty, and discount department stores, which were responsible for nearly half of all taxable sales. Continued sluggishness among used auto dealers also contributed to the decline. However, solid growth from business-industrial vendors and higher allocations from the countywide use tax pool partially offset these impacts. Looking ahead, while consumer spending on taxable goods remains relatively stable, recent declines in consumer confidence, driven by inflationary pressures, tariff concerns, and rising unemployment, pose risks to any future revenue growth. Any modest increases are expected to primarily offset statewide sales tax declines experienced over the past two fiscal years. The FY25-26 sales tax budget is $2.7 million more than the actual revenue received in FY24-25. Considering the declines in general retail activity and consumer confidence noted above, staff may recommend a reduction in spending later in the fiscal year once we have more data. The City’s property tax consultant is projecting higher growth than initially anticipated, primarily due to higher residential values, which account for 93% of total assessed value growth. The median home price continues to rise, though at a slower pace than in prior years. Final figures will not be known until all of the exemptions have been applied and half of the property taxes have been received. A summary of General Fund expenditures through September 30 follows. General Fund Expenditures