City staff surprised at unexpected drop in sales tax revenue midway through fiscal year

The first look at where the budget stands for one of the city’s most important funds revealed an unexpected drop in sales tax revenue during a meeting Thursday evening.

During the regular monthly Measure J Oversight Commission meeting, city staff went over the status of funds generated from the Measure J tax. The numbers show that sales tax revenue midway through fiscal year 2023-2024 is down 6%, or about $400,000.

Measure J, which was first approved in 2011, allows the city to collect one cent for every dollar spent here, with a few exceptions.

Kristopher Mooney, the city’s director of finance and treasurer, told commissioners the problem is not unique to Palm Springs. The rest of the Coachella Valley is also seeing a decrease in sales tax revenue, and Palm Springs and Rancho Mirage are two of the cities that have been hardest hit.

Mooney said the other cities’ sales tax revenue was down between 5% and 8%, and that Rancho Mirage has seen a 12% decrease. Coachella was the only city that saw an increase, at 1.6%. 

For Palm Springs specifically, Mooney said the decrease can be traced back to the city’s two biggest categories — restaurants and auto sales, which “took a big hit” in the last six months.

The decrease in revenue started sometime in February or March of last year, Mooney said. Then, from September through November, revenue decreased by 10% compared to the same time the year before.

Mooney said he was “surprised” at the drop in revenue. When creating the future Measure J budget, city staff projected an increase in revenue of betweed 2% and 3%.

“Hopefully, we recover that [revenue], because the budget would be impacted if the current downward trend continues,” Mooney told commissioners.

When asked what would happen if that revenue is not recovered, Mooney said projects currently in progress and being funded by Measure J should not be affected. 

“We might have to dip into that fund balance a little to support the projects,” he said, referring to the fund’s current balance at about $8.2 million.

Despite some concerns about the budget, several community-initiated projects are currently underway, including the shade structure coming to the Victoria Park playground. Commissioners learned that the project is set to begin next week and should be completed in about four or five weeks.

Other projects, like the new exercise equipment coming to Desert Highland Park, are in various stages of progress. The Parks and Recreation Department is in the process of reviewing the equipment and making a decision. The shade structure at the animal shelter is slated for completion at the beginning of March.

Three projects, including hiking trail maintenance, Swim Center updates, and Palm Canyon Theatre maintenance, are all in earlier stages of development with no estimated timeline.

Mooney said he and the rest of city staff are keeping a close eye on the budget because they’re seeing the downward trend affect the general fund as well. Mooney said they plan to meet with local restaurateurs and car dealership owners soon after getting more details on the revenue decline from city tax consultants. 

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