Photo by Jennifer L. Grubbs

Sales tax revenue too hard for city officials to predict in 2009

Craig officials are planning more conservatively for future sales tax revenue.

After a year of fluctuating returns - where sales tax earnings sometimes grew by more than 20 percent, only to fall sharply the next month - city staff budgeted for no revenue gains in 2009.

"We didn't know what (sales tax) was going to do so we backed off a little bit," City Finance Director Bruce Nelson said. "In 2009, we're hoping we can maintain what we have with the businesses we have now."

Sales taxes generally are considered a good record of consumer confidence because they directly reflect consumer spending.

Nelson said he didn't want to plan for growth after a year like 2008, and then force the city to cut purchases or services later in 2009 because the money wasn't there.

By comparison, the city budgeted a 3.6 percent revenue increase from 2007 to 2008, which Nelson also deemed a "conservative" approach. So far, through the ups and downs, sales tax revenue has increased about 10.9 percent through the last year.

The last time Nelson budgeted for no growth was earlier this decade, around 2002 to 2004, when the local economy suffered.

The city recently received November 2008 sales tax revenue, which showed an increase of about 2.4 percent from November 2007.

Although growth is good, City Manager Jim Ferree told the City Council on Jan. 13, he will reserve judgment on how good the news actually is until he can see December's numbers.

Based on how erratic the rest of 2008 was, there's no telling what those numbers may be, Ferree said.

On a month-to-month comparison, sales tax revenue grew by as much as 23.3 percent last year between February 2007 and February 2008. However, two months later in April, the month-to-month growth was down to 2.8 percent.

Sales tax growth was at its lowest for the year in June 2008, with 1.3 percent more revenue than June 2007.

July and August 2008 saw spikes in spending, with about 21 percent growth each month compared to the same month in 2007.

Since then, sales tax growth has been on the decline. After August 2008, growth dropped each month through November.

Nelson said it would be impossible to predict if the trend of declining returns will continue.

However, he does believe the actual sales tax revenue from December 2008 will be less than his budgeted prediction of $409,500.

Wherever consumer spending may be headed, records show that 2008 was a positive year for Craig.

Every month through November in 2008 was better than the same month in 2007. However, December will have to be well ahead of budget if 2008 can compete with the kind of growth seen between 2006 and 2007, recorded at 16.4 percent.

At any rate, it appears the city's consumer base expanded from 2007, probably due to the Wal-Mart SuperCenter opening on West Victory Way, Nelson said.

November 2008 was the first month that city officials could do a month-to-month comparison that includes Wal-Mart as a constant. It was impossible to tell if the growth in sales for previous months was because a new, major retailer opened or if people were spending more.

"Overall, I think our sales have grown," he said. "I hear we have more people coming from places like Rio Blanco (County), Wyoming and even Steamboat. That will help us a lot if things keep going the way they're going."

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