theadanews.com - Ada, Oklahoma

July 26, 2013

City’s sales tax numbers take a hit in May; was it part of a trend, or a fluke?

Eric Swanson Staff Writer adanewsreporter@cableone.net
www.theadanews.com

Ada —

Ada lost about $56,000 in sales tax revenue in May, but the drop should not affect the current budget, according to the city’s finance director.

The city’s deposit for July indicates that Ada collected about $1.19 million in sales tax revenue in May, the most recent month for which figures were available. Deposits are two months behind the actual sales tax collection.

Local merchants reported that their sales were down $1.4 million in May, which represents a loss of about $56,000 in sales tax revenues.

The loss in sales tax revenue shouldn’t affect the city’s current budget unless those collections fall below a certain level, finance director Donna Doolen said Tuesday.

“Because the process in place only allows the general fund to budget 90 percent of the estimated revenue to be generated in the year to come, then as long as a decrease is not extreme, the current budget should be fine,” she said in an email. “It will begin affecting the current budget when sales tax collections fall below the amount budgeted (that 90 percent). Should that occur, the city manager will have to propose a rebalanced budget.”

 

Building a budget

Sales tax revenues are the key to the city’s budget, accounting for approximately 70 percent of the general fund. The city uses that fund to cover a variety of expenses, including street maintenance, public safety and some administrative costs.

Ada reported a 2.36 percent increase in sales tax collections in fiscal year 2012-13, but collections were strongest in the last six months of 2012, Doolen said. She added that city officials have predicted that collections in 2013-14 will be about 2.5 percent higher than they were the previous year.

“Realistically, we anticipate monthly fluctuations and as long as they aren’t significant dips, then we wait to see where we are closer to mid-year,” she said. “If at that time, the actual collections to the budgeted revenue aren’t looking favorably, measures are taken by the city manager to rebalance the budget.”

Doolen said it was too early to tell whether May’s lower sales tax collections were a fluke or a sign of a larger trend, but she noted that sales tax revenues have been unstable since at least 2008. She said if the numbers indicate a longer trend, the city could be forced to cut back on services.

 

Seeking reasons

May’s sales tax numbers represented a slight decline rather than a dramatic drop in collections, said Joe Hill, vice president of the Ada Jobs Foundation. Still, Jobs Foundation officials are studying the numbers and trying to decide whether they represent a blip or the start of a more worrisome trend.

Hill said he compared Ada’s numbers with figures from Ardmore, Durant and McAlester, and all three cities reported lower sales tax collections in May 2013 compared to May 2012. He added that Durant’s figures for May 2013 were close to their numbers from the year before.

Ardmore’s sales tax collections dropped from $1.6 million in May 2012 to $1.5 million in May of this year, and McAlester’s fell from $1.25 million to $1.12 million, Hill said.

He said Jobs Foundation officials are always concerned whenever Ada’s sales tax revenues drop, and they are looking at possible reasons for May’s lower numbers. He speculated that a combination of factors — higher unemployment numbers, a weak national economy and rising gas prices — could be responsible.

“We’re maybe not seeing as many people that want to drive into Ada for groceries and things,” he said. “They may be reducing the number of trips.”

He said worries about the federal health care reform law may have prompted consumers to cut back on their spending.

Gem Jewelers owner Diane Criswell said her store has seen less foot traffic this year than it did in May 2012, and so have other downtown merchants. She did not have specific numbers, however.

Criswell said the city’s sales tax numbers for May highlighted the importance of patronizing local merchants whenever possible.

“I think it’s something to certainly be aware of and try to stress to people — how important sales tax is and to shop locally,” she said. “Because that was a pretty big drop.”