Visalia’s financial bottom line stays strong despite lower sales tax revenue

The city of Visalia reported lower growth in sales tax revenue in 2023, the council heard this week in a report. But it's not all bad.

Last year, sales tax revenue to the city climbed only 2% from the year before compared to double-digit increases of over $10 million in the past two years, which was about a 16% jump in sales tax revenue each year.

City finance chief Rene Nagel says the 2023 fiscal year sales tax revenue reached $84.6 million compared to $82.1 million in 2022 and $70.9 million in 2021.

The city enjoyed a sales tax boon in the past two reports despite the fact these were the years when COVID arguably shut down the economy, with the results coming in as a big surprise to the city - including staff.

In 2023, this slowed down here and across California, with some area cities reporting red ink in their general funds.

Despite slower growth in Visalia's sales tax income, the top category in the city’s general fund has roughly tripled since 2014 from $28.8 million. Even more impressive is that total revenue from all sources in 2023 was $177.8 million, including property tax, grant funding, franchise fees, and TOT bed tax monies. Total revenue is up from $163 million in 2022, an impressive jump of $15.8 million.

The city report says this is the tenth consecutive year that the General Fund has ended the year with a surplus, with the general fund’s fund balance (including the emergency reserve) at $55.4 million at fiscal year-end last June.

So, the slowdown in sales tax monies should not hurt the city’s budget picture again this year." We are in really good shape," says Visalia Mayor Brian Poochigian. He added that the slowdown in sales tax to 2% is probably" the new normal."

The report says, “Ca's continued high inflation rate contributed to the growth. Although we saw the California consumer price index come down to 3.1% as of June 2023, the average rate for the fiscal year stood at an estimated 5.52%. The main areas of the growth in Sales Tax for Visalia were in General Retail (department stores, apparel stores), which grew $.5 million, and Food Products (restaurants, food markets, liquor stores), which grew $.3 million."

Property Tax grew by 7% as existing house sales, new development, and property values increased in Visalia.

Travel down

Travel to the area saw a slight downturn in the fiscal year 2022-23 as Transient Occupancy Tax (TOT) revenue had a decrease of 1% as compared to last year, possibly due to less disposable income available to consumers.

Franchise fee revenue increased 17% in fiscal year 2022-23 due to gas and electric revenue increases as the city continued to have new developments and utility companies increased fees to their customers. Business license revenue increased 13% compared to last year as new businesses have been added, and sales growth has been indicated by sales tax growth.

Also, Visalia has 13,126 licensed businesses operating in the city, a net increase of 173 compared to last year. These include private manufacturing, technology research, retail and service businesses, educational services, healthcare and social assistance, consulting, arts and entertainment, hospitality services, and non-profit institutions.

Record year

The nearly $16 million jump in total revenue is even more impressive when we look at revenue gain for the past two significant sales tax years, increasing $11.6 million and $12.7 million, making 2023 a record year. Visalia's annual revenue has doubled since 2014.

Last year's surplus allowed the Visalia City Council to announce they could pay for the planned new Visalia Civic Center out of cash reserves built up by years of positive revenue. That includes the 2023 year when the city moved $10 million from the surplus into the $107 million civic center project, which is now in the final planning stages.

Mayor Poochigian says being able to pay for the civic center with savings has been a 30-year effort involving many city council members.

The report says that even with higher revenue, the city has also had higher expenses,

“The General Fund ended the 22/23 year with a change in fund balance and surplus of $15.85 million. Contributing to the surplus was not only the growth in the main General Fund revenue categories but also in uses of money and property (interest income), which was up $1.7 million as compared to last year as not only were interest rates up this fiscal year but there was a significant negative adjustment to the fair market value on investments held by the City last fiscal year which had decreased interest income. Additionally, fees and fines (vehicle, parking, and local ordinance violations) were up by $0.1 million.”

“However, the City did have a decrease in charges for services (engineering fees) of $1.4 million as development activity was down for the year and miscellaneous revenue by $0.8 million.

Employee expense

Offsetting the large revenue growth this fiscal year, total expenditures were up $6.6 million compared to last year, mainly due to increases in employee compensation of 8%. These increases also affect pension obligations. Additionally, we had increases in most all other costs due to inflation and capital outlay of $2.3 million as general fund projects, such as the East Regional Park Basin and Lower Kaweah/Mill Creek project.

New staff

The strength of the Visalia economy has allowed the city to not only raise wages but to hire new talent to guide the town from nearby communities, including the former city manager of Porterville, John Lollis, now Visalia assistant city manager and the former Assistant City Manager of Lemoore Michelle Speer who joined Visalia staff this week as the new community services director.

Poochigian adds that these positions are not new but were vacant and are now filled.

This article originally appeared on Salinas Californian: Visalia’s bottom line stays strong despite lower sales tax revenue