Upland’s Financial Reality

During the April 29th Special Finance Committee meeting, City staff presented updated financial data that highlights a significant shift in Upland’s fiscal outlook. The information shared makes clear that the City is facing a sustained decline in one of its most important revenue sources, and that this change has direct implications for residents and the services they rely on every day.

Over the past year, the City of Upland has experienced a significant shift in its financial outlook, driven primarily by a sustained decline in sales tax revenue. This is not an abstract budget issue. It directly impacts the services residents rely on every day, including public safety, road maintenance, parks, and overall city operations.

Since the adoption of the Fiscal Year 2025–26 budget, sales tax revenue has declined by approximately 10 percent, or $2.5 million. For context, sales tax has historically been the City’s largest source of General Fund revenue. That decline is substantial enough that property tax has now overtaken sales tax as the City’s primary revenue source.

What Is Driving the Decline

The downturn is not due to a single factor. It reflects broader economic and structural changes that are affecting cities across California, but have a particularly strong impact on Upland due to how our local economy is structured.

In the third quarter of 2025 alone, sales tax revenue dropped 6.7 percent compared to the same period the prior year. The largest contributor to this decline has been the Autos and Transportation sector, which had previously been one of the City’s strongest revenue generators. As that sector contracts, the impact is amplified because of how much it contributes to the overall tax base.

Fuel and service stations have also seen declines, though some recovery is anticipated due to rising fuel prices. However, these short-term increases are not enough to offset the broader losses.

Perhaps the most important long-term factor is the continued shift toward online shopping. A review of the City’s top sales tax producers shows that nearly half are losing market share to e-commerce. Every purchase made online instead of at a local business reduces the amount of revenue that comes back to Upland. This is often referred to as the “Amazon effect,” and it has a direct and ongoing impact on the City’s financial health.

Why This Matters to Residents

For residents, this decline translates into real consequences. The City relies on General Fund revenues to maintain core services. When a major revenue source drops by $2.5 million, the City must either reduce spending, use reserves, or identify new revenue sources.

Looking ahead, the City is projecting a $5 million deficit in Fiscal Year 2027 and a $5.3 million deficit in Fiscal Year 2028 if no corrective actions are taken. Even with modest growth projected over the next two years, those increases are not enough to recover the revenue that has already been lost.

This means that without changes, the City will face increasing pressure on its ability to fund essential services, address deferred maintenance, and invest in long-term infrastructure needs.

How the City Is Responding

City leadership has already begun taking steps to manage this challenge responsibly and avoid sudden disruptions to services.

One immediate strategy is the use of the Economic Uncertainty Reserve to temporarily offset the $2.5 million shortfall. However, this is not a permanent solution. By policy, any funds used from reserves must be repaid within five years, meaning this approach simply buys time.

Departments have also been directed to submit “rollover” budgets, which require them to maintain current service levels while absorbing cost increases without additional funding. In practical terms, this means doing more with the same or fewer resources, which becomes increasingly difficult over time.

At the same time, the City is actively exploring new, sustainable revenue sources to replace the declining sales tax base. This is critical because one-time solutions and reserves cannot support long-term financial stability.

The Bottom Line

Upland is facing a structural financial challenge, not a temporary fluctuation. The loss of $2.5 million in sales tax revenue is significant, and the trends driving that loss are ongoing.

For residents, the takeaway is straightforward. The way people shop, the types of businesses in the community, and broader economic trends all directly impact the City’s ability to provide services. Maintaining a strong, stable local economy is essential to maintaining service levels and investing in the future of the community.

The City is taking a measured and responsible approach, prioritizing fiscal discipline while working toward long-term solutions. But it is important for residents to understand that these challenges are real, they are ongoing, and addressing them will require thoughtful, strategic decisions in the years ahead.

Disclaimer: The Upland Update is an independent community resource and is not affiliated with the City of Upland. This is my personal initiative to keep residents and businesses informed about key issues, city developments, and community events that impact our daily lives. My goal is to ensure you have clear, transparent, and timely information to stay engaged and involved in shaping Upland’s future.

James Breitling

(909) 342-2523

info@theuplandupdate.com

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