Eureka faces rising costs, weak sales-tax revenue in budget warning

Weak sales-tax revenue and rising costs are squeezing Eureka’s budget, raising the prospect of tighter staffing, deferred road work and harder choices over police, parks and other city services. The pressure has become a practical warning sign for the city’s next budget cycle.

Eureka leaders dug into the numbers during a special joint meeting of the Eureka City Council and the Finance Advisory Board on May 26, when a 2026-27 budget study session was on the agenda. City budget materials show the proposed FY2026-27 budget was publicly available, and the city says its budgeting process begins in late winter to early spring before moving through the Finance Advisory Committee and the council.

The city’s financial picture has weakened fast enough to force discussion of future cuts. At a March 3 mid-year budget review, Finance Director Lane Millar said sales tax revenue had declined by almost $1 million since fiscal year 2021-22. He said sales tax makes up the majority of General Fund revenue and that Eureka is very reliant on it. Millar also said the city’s one-percent share of in-store sales tax revenue dropped by $915,000 from 2021 to 2024.

That drop was not isolated to Eureka. Millar said countywide in-store sales tax revenue fell by $2.9 million over the same four-year period, representing about $290 million in sales. The numbers point to a broader Humboldt County slowdown in spending, not just a problem inside Eureka’s city limits.

Measure H, approved by Eureka voters in 2020, raised the city sales tax to 1.25 percent and took effect in 2021. It was projected to bring in $9.6 million a year, but the city still has to manage pension debt and other fixed costs that keep rising even when revenue softens. A 2023 North Coast Journal opinion piece said Eureka spent $14.8 million on pension debt from 2016 through 2019, cut $1.1 million and six positions in 2020, and was on track to keep paying growing pension costs through 2040.

Millar said the city’s general-fund position had weakened and staff had begun strategizing future expenditure reductions. In plain terms, that means Eureka may soon have to decide what gets delayed, trimmed or left unfunded, from street work and public safety to maintenance, parks and administrative staffing.

The budget discussion came as council members were also weighing a separate proposal to raise their own pay, a politically sensitive issue for a charter city that would require voter approval. Together, the budget warning and the pay debate underscored a city under real fiscal strain, with less room to absorb the next setback.