Spokane eyes tight purse strings ahead of year-end as sales tax revenue struggles

By Tim Clouser | The Center Square

(The Center Square) – The city of Spokane is walking a tightrope as it approaches the end of the fiscal year, with the administration crossing its fingers in hopes of avoiding the fallout of a deficit.

The city council passed a biennial budget last week, balancing a $25 million deficit projected to surpass $50 million by the end of 2026, but the year isn’t over yet. The officials received an economic update last Thursday with data pointing toward rough roads ahead. 

Mayor Lisa Brown and her administration spent the last year preparing for the future, closing the gap that her predecessors left while moving money around to mitigate it in the short term. While Spokane appears set for the next two years, all that still relies on current tax collections. 

“The city, I think, should count on slow growth,” said Dr. Patrick Jones, executive director of the Institute for Public Policy & Economic Analysis at Eastern Washington University. “Taxable retail sales last year was only 1.6%; the average going back 20 years has been over 4%.”

He was only able to share data through the second fiscal quarter of 2024 due to what was available; still, Jones said taxable sales trended similarly to the second quarter of 2022 and 2023, meaning there was little growth, and estimated around a 1% increase over the third quarter compared to last year. 

Council Budget Director Kate Fairborn told the officials in September that despite cost-saving measures, the general fund deficit was increasing due to declining tax revenues. She said the city was about $35 million behind what it was projected to generate by Sept. 20. 

Spokane Communications Director Erin Hut then disputed this and told The Center Square that Fairborn’s data did not give a “true representation” of the revenues. However, Hut provided data on Monday showing that sales tax revenue is, in fact, not keeping up with projections. 

“The former administration previously budgeted for a 2.5% revenue growth year over year, but our CFO Matt Boston reduced it down to a 1.2% year over year growth,” Hut wrote to The Center Square.

Still, her data through September showed sales tax growth sitting at 1.02% compared to last year. While minor, the 0.18% delta amounts to roughly $19 million. However, that doesn’t mean Spokane is that far in the hole, as it generates far more than it spends each year. 

The city collects over $12 billion in sales tax revenue annually, with the vast majority going to the state and federal government. Spokane is likely only entitled to a portion of the $19 million delta, but sales taxes aren’t its only source of revenue, just the largest. 

According to a Sept. 2024 Financial Report, Spokane’s general fund is about $1.3 million under budget, so the administration has a little cushion if the fourth quarter doesn’t go well. Hut said they won’t have that year-end data until February, so it could be a while until they know how things finish.  

If Spokane does end 2024 in a deficit, it could lead to increased oversight from the state. Hut said regardless of what happens, the administration will continue to identify more efficiencies. 

“While we are less than .2% [away] of our budget, we still have three periods left to report for the year, and they are showing very positive news reporting,” Hut wrote.