Revenue from Building Permits Permitting activity is influenced heavily by the economy, interest rates, construction costs, as well as global events such as the pandemic and tariffs. Although the Northland project was approved by both the City Council in 2019 and Newton voters in 2020, the coronavirus pandemic slowed its construction schedule. Additionally, the expected Riverside project is still on hold for the time being. Despite FY2025 revenue running significantly higher than originally budgeted, there are still considerable headwinds from the continued high borrowing rates, inflationary pressures, labor market and supply chain issues, tariffs and project delays, so we continue to be careful with this projection. The FY2026 budget for revenue from building permits has been set at $9.81 million. Revenue from Interest Income Interest income earned on the City’s cash and investments has been as low as $200,000 during the past decade when interest rates reached a record low of 0.25% in December 2008. In late April 2020, the Federal Reserve Bank decided in response to COVID-19 to again lower the Federal Funds Rate to that historical low of 0.25 percent. The Fed signaled that they expected rates to remain at those historic lows until 2023. However, the Federal Open Market Committee (FOMC – the Fed committee that determines interest rates) started the “tightening” process in March 2022 by raising interest rates 0.25%. At subsequent meetings, the Fed greatly accelerated the pace of rate hikes, and by the end of 2022, the fed fund’s target rate stood at 4.25% to 4.50%. The 0.25% rate hike in March 2023 followed a similar rate increase in early February. The fed funds target rate increased further to the 5.25% to 5.50% range in mid-2023 through Q3 2024 but has now returned to the 4.25% to 4.50% target range.
At its most recent meeting, March 18-19, 2025, the FOMC did not adjust interest rates. However, there is still a significant amount of uncertainty, considering everything currently happening in the world economy.
While the city expects significant interest income to continue in FY2026, it cannot expect it to continue nor can it “bank on it” in subsequent years. The city expect that Interest income will become a “declining” revenue stream over the next few years and must budget this source of funding carefully. The city set the interest income revenue budget at $6.5 million, an increase of $1.5 million over FY2025 (net of extraordinary interest on Bond Anticipation Notes). As always, all surplus interest income above the $6.5 million will drop to Free Cash where it will be invested in and appropriated for much needed one-time expenditures. Revenue from Parking Meters & Parking Violations Parking meters were first installed in the 1930s to instill some order to the chaos of street parking. Charging promotes turnover to regulate the use of a scarce and valuable resource – curb space in dense areas. Over the years, the city has installed new “smart” parking meters which accept credit card payments and allow the city to monitor how consistently they are utilized. Throughout the pandemic, the City made the conscious decision to not enforce parking policies, as an attempt to entice people back to the village centers. After the pandemic, the City began
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