Finally emerging from the long shadow of the Great Recession, the city of Vancouver’s finances through the first three quarters of this year are in good shape, finance staff members told the city council Monday.
This year’s revenues are expected to be roughly $4 million higher than projected, largely due to sales tax. Auto sales and construction sales, which generate sales tax, are growing the fastest as people resume buying new vehicles and the housing market heats up. Vancouver’s auto sales this year have far exceeded sales numbers when the economy peaked in 2006-07, according to city Deputy Finance Director Natasha Ramras.
Due to the rise in revenues, the city likely won’t need to draw $3.7 million from its reserve funds to balance the 2015-16 budget as city staff had expected. Vancouver’s 2015 general fund budget is $137.7 million. Fueled by tax revenues, money in the general fund may be spent for any purpose.
However, Ramras warned that the robust growth probably won’t continue long-term “because it cannot possibly grow that fast in perpetuity.”
“So the question is, what does the future hold?” Ramras asked.
Although the recession officially ended in June 2009, Vancouver’s economic recovery has been gradual and the city’s budget didn’t stabilize until 2012, City Manager Eric Holmes said Monday. The local economy showed improvement in 2014, and this year it’s been making strong gains.
The city’s unemployment rate has fallen to 6.3 percent, the lowest it’s been since September 2007, before the recession began. The national unemployment rate is 5.1 percent.
Projected to total $31 million by the end of 2015, city sales tax revenues are expected to surpass 2007 levels, when revenues were about $27 million. From January through September, the city’s sales tax revenue was $25.4 million, compared to $22.1 million for the same time period in 2014. Sales tax revenues this year are $5.2 million higher than the $20.2 million generated in 2013 from January through September.
Construction activity has been increasing in the residential and multifamily sectors, but commercial construction has fluctuated. The city’s real-estate-market-related revenue has been higher than anticipated, with about $2.2 million in projected revenues, according to city staff.
One unexpected revenue source came from recreational marijuana excise taxes, of which Vancouver is receiving $790,500 for the state’s 2016 fiscal year. That’s the highest amount of any city in Washington, according to statistics from the Association of Washington Cities. Two of Vancouver’s pot shops — Main Street Marijuana and New Vansterdam — consistently post the highest sales figures in all of Washington.
Another revenue change has been the state gas tax distribution, of which Vancouver will receive $220,000 this year. The money will be funneled into street sweeping.
“Overall, the news is really very positive,” Ramras said.
The city council will begin discussions in November about where to allocate the additional revenues.