Home sales and tourism will continue to drive the Napa economy — and the city’s coffers — over the next two years, according to a budget proposal due for passage later this month.
But officials are pulling back on their forecasts of hotel-based revenue amid expectations of slower growth in that segment, even as applications to build more lodgings continue to flow into city offices.
Napa’s latest biannual budget proposal allots $201.1 million to the city’s general fund from this July through June 2021, against revenue projected to reach $204.1 million, members of the Finance Department told the City Council last Tuesday. The budget is scheduled to come before council members for approval June 18.
General fund revenue is expected to rise from the current fiscal year’s $97.1 million projection to $99.4 million in 2019-20, followed by $104.7 million in 2020-21. Expenditures are project to increase from $96.9 million to $97.9 million in 2019-20 and $103.2 million for 2020-21.
As in recent years, the top two revenue sources are expected to stem from property taxes collected on still-climbing housing prices, and the steady flow of visitors filling Napa’s hotel beds.
With the growth of Napa’s reputation as a vacation destination, the city has increasingly relied on the dollars vacationers bring into the local economy, especially the transient occupancy tax collected from guests at hotels, bed-and-breakfast inns and city-licensed home shares. Room-tax funding has more than doubled in eight years, from $11.5 million in 2011-12 to a projected $25.2 million for the fiscal year that ends June 30 – accounting for nearly 26 percent of Napa’s $97.1 million general fund, the portion used for normal city expenses, statistics show.
But while bed-tax funds continue to fill Napa’s checkbook – augmented by an increase from 12 to 14 percent voters approved in November to bolster affordable housing efforts – a slowing rate of increase has led city staff to cut its revenue forecasts beyond 2019, reported Jessie Gooch, city finance analyst. Napa earlier reduced this fiscal year’s hotel-tax projection by more than $1 million from earlier estimates, and is setting a lower forecast of $23.7 million for 2019-20 and $25.7 million in 2020-21, she said.
That cautious forecast notwithstanding, hotel construction and planning has continued this year in Napa. Work is continuing on a Cambria hotel on the Soscol Avenue commercial strip, and the local developer James Keller recently introduced design plans for a 163-room hotel that will incorporate the former Franklin Station post office on downtown Second Street. Elsewhere, the owners of the Napa Valley Wine Train are pursuing a 151-room hotel on McKinstry Street that also would replace its rail station, and the city in July 2018 approved a 253-room Marriott in south Napa near the Meritage resort.
Napa is forecasting property tax revenue of $72.5 million and sales tax revenue, the general fund’s third-largest funding source, of $38.4 million for the next two-year budget period.
Public safety will account for more than half of city spending in the budget proposal, with $64.2 million devoted to Napa Police and $40.4 million to Napa Fire through 2021. Public works is third on the expenditure list, at $27.9 million.
Capital improvement programs for city-owned buildings, roads and facilities are allotted $44.8 million through 2021, using money from the general and single-purpose funds. That sum is to include $20.3 million to overhaul streets and sidewalks, plus $17.6 million for the water system.