Visalia General Fund is in good shape; city staff asks to increase emergency reserve fund

While other cities, including Fresno and Los Angeles, are seeing sharp declines in their critical general fund budgets, Visalia is once again projecting a healthy surplus for the current fiscal year and the upcoming one that begins in July.

Visalia’s Department of Finance has long taken a conservative approach to revenue projections. Still, the latest estimate again comes in higher than expected, continuing a trend seen in recent years.

At an April city council study session, finance staff presented the Mid-Year Budget Update for the 2024–25 fiscal year. Initially, revenues were projected at $101.2 million, but updated estimates now forecast $107.6 million — a $6.4 million increase.

The finance department is recommending the city council increase the emergency reserve fund from $22.7 million to $25.8 million. The city recently expanded its policy to maintain reserves at 30% of operating expenditures, up from 25%.

This latest increase in projected revenue is driven less by higher sales tax collections and more by property taxes, which are expected to come in $3.7 million higher than previously estimated.

Sales tax revenue is now projected to reach $46.4 million by June — just $300,000 above the earlier forecast. The report notes there is effectively “no sales tax growth.”

By contrast, city sales tax revenue surged during the COVID-19 pandemic, growing 29% in 2021–22. Over the past 15 years, Visalia’s average annual sales tax growth has been about 5.5%. Looking ahead, the city projects sales tax growth of just 1% in 2025–26 and 2% in subsequent years.

Sales and property taxes account for 78% of Visalia’s general fund revenue.

Council members continue to support the city’s conservative forecasting approach, citing ongoing economic uncertainty. While the April report mentions several risks, it does not address tariffs, which are currently a top concern.

Another major factor is the slowdown in homebuilding nationwide, including in Visalia. However, a significant number of new homes are in the pipeline, awaiting permits from national and local builders after recent annexations opened up additional land for development.