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Happy new fiscal year! I hope your budget is adopted and you have a solid vision for the next 12–24 months for your agency.
In my travels around local government, I have been hearing a lot about sales tax revenue uncertainty. Special districts don’t fret as much, as they mostly drive funding through rates subject to a voter protest vote. But for many cities, sales tax revenues are their primary source of funds. This is particularly so for “no and low” property tax cities that get a much smaller share of property taxes than older, more established cities.
In general, the outlook on the economy is cautious. Uncertainty about tariffs combined with fluctuating projections about the odds of an impending recession are prompting many cities to lower assumptions about their sales tax revenue generation. Recent federal immigration enforcement activities are likely to dramatically affect retail activity in some communities, creating even stronger budget headwinds. Finally, ongoing transitions in consumer spending patterns with a shift away from goods toward services also undermines the portion of economic activity subject to sales tax revenues.
Cities are starting to look at alternative funding sources to address ongoing financial needs, especially as many cities have maxed out their statutory limit for local taxes. User utility taxes, real estate transfer taxes and more transient occupancy taxes are popping into discussions. Still others are contemplating parcel taxes of some form — despite the 66% threshold required for approval — because of the consistency such taxes deliver. Finance directors are busily asking HdL for revenue estimates or pulling out their spreadsheets to run the estimates themselves.
The moves signal the start of ballot measure season — yes this early. If a city is thinking of targeting November 2026 for a voter ask, the work should be starting now or soon with an RFP for finding consultants, polling to inform policy choice and getting ahead of messaging and outreach needs. I have already seen several RFP’s hit the streets for November 2026 target dates. Time flies on the ballot measure front.
Tripepi Smith has helped a number of cities with ballot measure outreach. If you have questions or want to just talk strategies, we are here for you!
Cheers to FY 2026,
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