Modesto sees good trends for general fund

The Modesto City Council’s Effective Government Committee received good news last week about revenue sources trending higher than expected for the city’s $113.9 million general fund budget, but officials remain concerned about the budget’s largest funding source – sales tax revenue.

Budget Manager Steve Christensen provided committee members with a midyear review of the general fund (the budget year is July 1 through June 30) and told them several revenue sources are higher than expected. Those projected gains include $300,000 for property taxes (to $27.9 million) and $175,000 for the transient occupancy tax (to $2.04 million). The latter is paid by motel and hotel guests.

In all, revenues are projected to come in $659,000 higher than budgeted against a projected reduction of $250,000, from roughly $2.04 million to about $1.8 million, for commercial construction permits. Christensen said some projects have not materialized as quickly as anticipated.

The general fund is critical because it primarily pays for public safety services.

Christensen told the committee that sales tax revenue is coming in lower than expected but the city is waiting for more information before making a decision on whether to adjust how much it has budgeted for it. The city has budgeted $30 million.

Christensen said from July 1 through Nov. 30, Modesto has received $8.7 million in sales tax revenue vs. $9.1 million for the same period in the previous general fund budget. He said the city is waiting to get its December sales tax payment from the state to get a better idea of how revenue is trending. The December payment includes the all-important holiday sales.

Modesto also is getting less sales tax revenue because of falling gasoline prices, but Christensen said the city expects that eventually residents will start spending what they are saving at the pump. The city also is concerned about losing sales tax revenue to online purchases and to Turlock and Riverbank.

Christensen said Modesto should have a better idea of the trends in about a month after getting more data and meeting with its sales tax consultant. He will provide the Effective Government Committee with an update after that.

While Christensen made a presentation to the committee, the full City Council will have to vote on whether to adjust how much the city is budgeting for general fund revenues based on the trends it is seeing.

This story was originally published February 28, 2016 at 6:34 PM with the headline "Modesto sees good trends for general fund."