The city of Lacey’s finance director said he is cautiously optimistic about the city’s general fund budget for 2016 after some better than expected revenue and building permit figures for the city in the first few months of the year.
In fact, the city issued 42 single-family residential permits in April, the most in five years for that month, Finance Director Troy Woo said this week.
“We’re definitely seeing some positive signs,” he said.
Woo still is forecasting a general fund deficit in the range of $700,000 to $800,000 for next year, largely due to the recent trend of flat sales tax revenue, while labor and health insurance costs for city employees continues to rise.
But that projected deficit might change if the city’s first-quarter revenue performance holds true for the rest of the year.
A closer look at the numbers:
-Year-to-date sales tax revenue, including that generated by construction, is about 10 percent higher over the same period last year.
-In April, sales tax revenue showed a $38,000 increase over the same month last year.
-Year-to-date, 95 single-family residential building permits have been issued, compared to 82 through the same period last year.
The city is benefiting from the construction of the new Lacey campus of South Puget Sound Community College on Sixth Avenue, and issued single-family building permits should mean more construction-generated sales tax revenue in the future, as well as future spending by the families that occupy those dwellings, Woo said.
But Woo also cautioned that construction-generated sales tax revenue tends to be one-time in nature. In other words, once the project ends, so does the sales tax revenue.
For example, year-to-date sales tax revenue for the city is only 1.4 percent higher from last year if you remove the effect of construction, Woo said.
The city also didn’t get a boost from utility tax collections, which fell by about $80,000 in the first quarter from last year, because of the mild winter. In other words, households had no reason to crank up the electricity or natural gas because it just wasn’t that cold.
And the telephone utility tax fell by about $4,300 in the same period because households continue to ditch their landlines in favor of mobile devices.
“The decline to telephone utility tax is slower than past years, so it appears the trend is stabilizing,” Woo said.