The city’s third fiscal quarter is following the positive trend of the two quarters that preceded it.
Tuesday, before delving into budget talks for the upcoming two years, the City Council took a look back and reviewed the city’s financials from the third quarter. The period covers revenues and expenditures through March 31, which are both in better positions than originally anticipated.
When the 2012-2013 budget was approved in the summer of 2011, the city anticipated a $3.9 million deficit that would be filled with money from operating reserves. Now, thanks to expenditure cuts and savings and higher-than-projected revenue, the city expects to close out the year with a $3.1 million surplus, said interim finance director Bill Zenoni.
“It looks like the city is on track,” he told the council Tuesday. “It looks like we’ve turned the corner.”
Throughout the past two years, the council has adjusted its budgets to reflect the improving trends, so the better operating position presented Tuesday was not a surprise.
As has been the trend of late, revenues from the three sources that contribute the most to the General Fund — property, sales and visitor taxes — are up.
The city expects to close out 2012-13 with $23.1 million in property tax revenue, up from the $22.4 million that was originally budgeted, according to the report. The amount of property taxes received thus far is behind the five-year trend by about $700,000, but the city expects the revenue will be near the budgeted amount by the end of the year.
More than 75 percent of this revenue comes from residential properties and the amount of revenue received thus far represents the first installment of property tax payments, the report said. The second installment is typically paid in the final quarter.
The city’s second-highest revenue stream, sales tax, is expected to exceed the budgeted amount of $13.4 million and come in at $13.9 million, according to the report. When the budget was first approved in 2011, the city expected to receive $12.3 million in sales tax.
City Manager Mike Parness said the increase is due to a rise in gas sales and prices, a jump in car sales, and a boom in Napa’s restaurants. It is thought that people are buying more cars now because they held off on such purchases during the recession.
Parness said he expects car sales to level off in the coming years, but sees continued growth in sales tax generated by restaurants.
“The restaurants seem to be doing well,” Parness said. “We’re seeing more and more so that should be a growth area for us.”
Possibly the city’s brightest spot in terms of future revenue is transient occupancy tax, or the taxes visitors who stay in Napa lodging pay.
“I think what you’ll see in the next few years is our (visitor tax) catching up to and passing the sales tax, at least in the near term,” Parness said.
This revenue stream was originally projected at $10.6 million, but now the city expects to end 2012-13 with $12.8 million, according to the report. The city of Napa currently boasts 24 hotels, 19 bed and breakfasts and 36 vacation rentals.
“I think we’re going to see added rooms and I think we’re going to see an elongation of the season and a stabilization of the room rates,” Parness said. “We’re quite a bit behind the Upvalley cities in terms of room rates but I think that’s changing. ... I think (visitor tax) has the potential for growth.”
The city’s smaller revenue sources, including franchise fees, miscellaneous revenue and intergovernmental revenue, are not faring as well. Together, they’re expected to come in about $500,000 under budget.
This decrease is canceled by the $500,000 anticipated increase in sales tax revenue, meaning the city still expects to end the year with a $3.1 million surplus, according to the budget.
According to the report, all city departments were operating within their approved budgets as of March 31.
This week, the council began looking at the budgets of the upcoming two years. On June 4, the first public hearing will be held about the budgets for 2013-14 and 2014-15, which are projected to be balanced.