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 %

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

Since the Great Recession, the city has reduced costs to help close the budget gap as expenses have increased. As a service organization, labor is the city’s biggest cost.

• The city implemented pension reforms, slowed payroll growth, reduced salaries and benefits, and increased employee contributions to benefits.
• Despite the city's growing population and demand for services, staffing has been reduced by 38% per capita since 2008.
• The city has postponed hiring new staff members, except for essential positions.
• To reduce costs related to salaries and benefits, the city has utilized part-time and contract employees.
• Retiree health benefits have been eliminated for new employees.
• The city has reduced the scope of services in contracts, such as landscape maintenance.
• Maintenance and capital costs have been deferred, and vehicle life cycles have been extended.
• The city has secured state and federal grants to support key projects.

During the recession and as the economy began to recover, our strong fiscal management didn’t waver.

The city:

• Maintained quality-of-life services while minimizing cuts.
• Deferred millions in maintenance and capital improvements and reduced the scope of maintenance contracts.
• Maintained strict fiscal accountability and a balanced budget.
• Sought revenue opportunities from city-owned assets. 

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.