Jamestown is projected to miss its sales tax budget for this year by about $544,643, or 6.1%, unless the city gets an early Christmas present.

This is a problem that should have been avoided by either former Mayor Eddie Sundquist or the City Council.

The shortfall discussed by the City Council’s Finance Committee last week is a shortfall of the city’s own making. Sales tax revenues aren’t far off compared to what the city actually received last year – $72,890 in the first sales tax receipt from the county and $170 in the second sales tax receipt from the county. That’s an amount that can be made up rom the city’s contingency fund if necessary during an end-of-year budget adjustment.

So what is the cause for alarm? Frankly, a bad piece of budgeting.

Last fall most economists were projecting some sort of economic downturn. No one was really sure how bad it would be, but it didn’t seem wise to put a lot of stock in huge sales tax increases last year. The budget proposed by Sundquist proposed a 4% increase in city sales tax revenues anyway. That decision was based on a 5.8% sales tax increase in the 2023 budget after a 2.3% increase in sales tax actually received in 2022. As it turned out, fourth quarter sales tax growth was 1.8% and, rather than being a sign of the typical fourth quarter spending slowdown perhaps was a sign that a sales tax boom was about to go bust as the Federal Reserve increased interest rates in an attempt to quell rising inflation rates.

What we’re seeing now, in the first two quarters of 2024, is a bad bet on sales tax last year. Mayor Kim Ecklund noted the potential issue last year when the City Council approved the 2024 budget, saying she had doubts the city would hit budget projections for property and sales taxes.

As the 2025 budget is developed, a conservative approach for sales tax is needed because no one can read these economic tea leaves.