Factors beyond the city’s control have permanently slowed sales tax revenue growth and increased the rate at which expenses are growing. Today, the city’s budget needs cost more than it has revenue.

Sales tax revenue—one of the city’s primary revenue sources—is no longer keeping up with the cost of providing services or maintaining the city's aging infrastructure. Sales tax growth has flattened due to a continuing shift in consumer habits.  The trends below affect the sales tax dollars received by the city. While sales tax revenue is still increasing from year to year, that growth rate is smaller than it’s ever been.

• The explosive growth in online shopping. The city only gets a a fraction of sales tax collected from a sale online, compared to a full 1% from a purchase made at a retail store in Folsom.
• A shift of buying more non-taxable services than goods
• Inflation reducing consumer purchasing power.

The city's sales tax growth rate averaged approximately 6% annually from Fiscal Year 2010 through Fiscal Year 2017. However, since then, it has decelerated significantly to a more modest growth rate of around 2% per year.

The slowed sales tax growth and rising costs contributes to a structural deficit, making it fiscally unsustainable to maintain current services beyond Fiscal Year 2024-25 without additional revenue

Over the past 10 years, the city has reduced costs to help close the budget gap as expenses have increased. In response to current and anticipated future budget challenges, staff has reduced expenditures by taking the following actions:

• Deferred millions in maintenance and capital costs and reduced maintenance contracts.
• Sought revenue opportunities from city-owned assets.  
• Looked for economy in purchasing and processes.
• Taken steps to contain city staff/retiree pension costs.
• Deferred hiring new staff across all departments.
• Reduced benefits to new hires.

Despite these steps, the city is still facing a projected budget deficit.

The city is at a point now where budget cuts will be increasingly noticeable in the community, and difficult decisions must be made. The standards and services the community has come to expect are starting to decrease and decline.

The city is primarily in the business of providing services, so not surprisingly a significant portion of the city’s General Fund is allocated to salaries, wages, and benefits for the employees who provide those services. With these costs on the rise, maintaining a balanced budget requires difficult choices. The city may need to cut services, trim its workforce, adjust compensation packages, or a combination of these measures. 

Sustaining competitiveness in employee compensation within the region is already a formidable task, and it's anticipated to become even more demanding. Recent negotiations with labor groups included benchmarks from neighboring cities who have approved local sales tax measures, creating a challenging standard for total compensation. The City of Folsom is unlikely to match the compensation packages of cities with significantly greater financial resources. This limitation may adversely impact the city’s ability to attract and retain high-quality candidates, particularly evident in certain job classifications. 

Beyond salaries, the escalating cost of operations poses additional challenges. Some bids are coming in at double the anticipated amounts, and the city lacks the financial cushion to absorb such increases.

The City of Folsom provides many services to protect the health and safety of our community and our environment and to help our local economy thrive. Here are a few examples:

• Public safety services, including 24/7 police, fire, and emergency medical services
• Infrastructure construction and maintenance, including roadways, traffic lights, streetlights, bridges, and more
• Utility services, including water, sewer, trash, and recycling
• Parks, recreation, and open spaces
• Library services
• Economic development services
• Code enforcement
• Stormwater and environmental services
• Building permits and inspections
• Planning services

Learn more about all the services the city provides.

How You Pay for Services
There are three main ways that residents, businesses, and visitors pay for city services:

1. Utility fees
   Utility fees are charges for services that you pay on a bill. For example, your utility fees for water, trash, recycling, and sewer are listed on your utility bill.
2. User fees
   User fees are costs for using a city service, attending a program or event, etc. For example, you pay a user fee to take a class at the Folsom Community Center or visit the Folsom City Zoo Sanctuary.
3. Taxes
   Taxes include property tax, sales and use tax, TOT, and utility users tax. The connection between the taxes you pay and what you receive is not as immediately obvious. That’s because the city combines tax revenue into a general fund. This pays for services like police, fire and emergency medical services, park and open space maintenance, library services, and more. As a result you can visit city parks or the library once or 100 times without ever receiving a bill.

• State: 77.4%
• Sacramento County: 3.2%
• Measure A: 6.5%
• City of Folsom: 12.9 %