The city’s finance director said a slight ‘dip’ in sales tax revenues over the next two years is related to economic slowing across the region during a March 3 City Council meeting.
Petaluma’s general fund revenues are expected to grow more slowly than its expenditures over the next five years, according to the city’s finance director.
“We currently do expect our sales tax revenues to dip slightly in the current year and again in fiscal (year) ’26, and we are showing slower growth in the years after,” said Finance Director Jessie Gooch during a General Fund forecast update at the March 3 City Council meeting. ”And this is related to economic slowing in the larger region. It is not Petaluma-specific.“
Meanwhile, the city cut four and a half positions and created seven and a half others “to address operational needs affecting processes and activities,” according to a staff report.
For the 2024-25 fiscal year, general fund revenues are projected to be $1.8 million more than budgeted, while expenditures are projected at $1.5 million higher than budgeted, reflecting an overall change of 2% for both revenues and expenditures, according to staff.
In total budget numbers, revenues are projected to be $78.8 million, up from the $77 million figure previously budgeted, with projected expenditures now at $78.9 million, up from $77.4 million, according to staff.
Despite that, sales and use taxes saw an 11% decline and property transfer taxes saw a 17% decline from what was previously budgeted for this fiscal year, according to a staff report. But the city made up for it through unexpected reimbursements to the Petaluma Fire Department.
As Gooch explained to the Argus-Courier, whenever Petaluma Fire Department staff are deployed to emergencies in other jurisdictions – as happened in January when local firefighters went to help fight wildfires in Los Angeles – the city’s fire strike team gets reimbursements from the California Governor’s Office of Emergency Services.
“Since deployments are unpredictable from year to year, we budget for a low amount of anticipated reimbursements each year,” she said.
The city’s reimbursements for both the strike team and the ground emergency medical intergovernmental transfer program were more than the city originally budgeted, and the adjustments were noted in the budget changes, Gooch said.
Similarly, expenditures this fiscal year were higher than projected based on costs associated with strike team deployments, plus additional spending capacity from a ground emergency medical transport intergovernmental transfer program.
As far as other revenue sources are concerned, Gooch said she anticipates property taxes to grow at a 4.2% rate annually “based on historical performance,” and other sources to grow at the “target” consumer price index rate of 2%.
The city’s top revenue generators are property tax, sales tax, intergovernmental revenues, charges for services, and transfers in from other city funds, Gooch said.
The bulk of the city’s expenditures, about 80%, are for employee wages, salaries and benefits, which is the case for the next five fiscal years, Gooch said.
Other expenditures include services and supplies, intragovernmental charges, capital outlay and transfers out to other city funds, she said.
“The city has been impacted by escalating costs of both services and supplies,” she said. “Expenditures overall are forecast to grow at an average rate of 3.7%, which is higher than our annual revenue growth of 2.4%.”
At the March 3 meeting, Councilmember John Shribbs asked how dependence on federal money could impact the city, and in response Gooch said the city’s finance department is compiling a list of federal grants and doesn’t expect losses from current obligations, but is “reviewing things closely.”
City Manager Peggy Flynn added that the city is working to strategize with service providers who anticipate decreased funding, particularly homeless providers and the Meals on Wheels program.
In response to inquiries by council members Karen Nau on car sales taxes and Alex DeCarli on how Petaluma is matching up to other cities, Gooch said her office would return to the council with information on both.
“We are currently working on creating a balanced general fund budget for fiscal ’26, but we are facing the combination of softening revenue growth and escalating costs,” she said. “We will need to implement budget balancing strategies as we move forward, and we do plan to discuss potential strategies in more detail with the council in May at the budget workshop.”
She added that her office is forecasting “less flexibility” for new programs and services, along with a need “to focus on preserving our current level of core general fund services.”
Her department will present an update at a city budget workshop in May, Gooch said.
You can reach Staff Writer Jennifer Sawhney at 707-521-5346 or [email protected]. On X (Twitter) @sawhney_media.
