Northampton grapples with shrinking cannabis, hotel, and building permit revenues
Cannabis, hotel, and building permit revenues are all declining, prompting concerns about whether spending can be sustained.
NORTHAMPTON — The city brought in less than 1% more revenue than expected in the final quarter of fiscal 2026, but several major income sources are shrinking year over year, Finance Director Charlene Nardi told the City Council on September 17.
Three revenue streams have declined significantly: cannabis sales taxes, hotel and motel taxes, and building and plumbing inspection fees. Nardi said the drops signal a need to examine spending, even as the city remains financially stable overall. "We are coming to a place where our expenses are exceeding our ability to cover them," she said.
Cannabis tax revenue fell steeply, from nearly $1.1 million in fiscal 2025 to less than $845,000 in fiscal 2026, Nardi said. That drop erased gains the city had posted since fiscal 2023, when cannabis tax brought in $846,000. Nardi attributed the decline to marijuana shops opening in neighboring towns, which has diluted Northampton's market share. "Northampton was the first to have cannabis shops, and then other communities around us started getting them, so we're spreading out the market share," she said.
Hotel and motel tax revenue came to $1.07 million in fiscal 2026, down $17,600 from the prior year, though it exceeded projections by over $95,200. Mayor Gina-Louise Sciarra suggested the previous winter's harsh weather had dampened travel and hotel stays.
Building permit revenues fell by approximately $100,000. Nardi linked the decline to high construction costs and inflation, which have reduced people's discretionary spending on building projects. "If people are not building, if they're not spending their money, new growth is going to drop," she said. That matters because real estate and personal property taxes account for 61% of city revenue.
One bright spot emerged: the meals tax grew by approximately 10% over projections. Nardi said the city's new Fiscal Assessment Community Task Force, known as FACT Force, would explore ways to reverse downward trends and boost revenue. She also urged residents to shop locally to keep tax dollars circulating in Northampton.