A 13% drop in sales tax revenue would usually sound a four-alarm fiscal fire. But in times of coronavirus, Sioux Falls leaders can look at that revenue curve and say, “Hey, it could be worse!”
“When you talk about sales taxes and entertainment taxes, they are down significantly, but the story is better than what we were necessarily modeling,’ City Finance Director Shawn Pritchett told the City Council when presenting the May financial report Tuesday.
Sales tax revenue was down 13% compared to May of last year. Entertainment tax revenue fell by 47.3%. Pritchett said he expected a drop of closer to 60% in entertainment tax revenue [Carter Woodiel, “Sioux Falls Tax Revenue Plummets, But Not by as Much as Expected,” KELO Radio, 2020.06.23].
Year to date, Sioux Falls is only 5.1% behind last year’s January-through-May tax collections. The city has collected 42% of the revenue it expected, compared to 43% at the five-month mark last year. City spending is down 5.2% over the same period; Mayor TenHaken has burned up only 33% of budgeted funds versus 35% as of May last year.
And these two months of lower tax collections haven’t wiped out the average rolling growth rate. Over the last twelve months, Sioux Falls has averaged 4.4% growth in sales tax.
The Sioux Falls Monthly Financial Report provides a wealth of other grim economic statistics for South Dakota’s biggest town:
- From February to April, 12,652 Sioux Falls workers lost their jobs, moving unemployment in the Queen City of the East from 3.2% to 10.6%.
- Sales of lumber, hardware, and garden supplies may be up 13%, and the number of building permits issued so far this year for single-family homes is up a tick from last year (though those permits are still down from 2018 and 2017, indicating deeper drag in the Trump economy, because why build a nice house when the Trump/Barr brownshirts are going to come and drag you off to the camps?), but the total value of those Jan–May permits is only $233.3 million, down 15.0% from 2019 and down 23.8% from 2018.
- Of $27.5 million in increased sales across nine lucky industries in May, 43% came from remote retailer sales, which rose 86%. The only industry that saw gains close to that were Sioux Falls liquor stores, which sold 74% more hooch (evidently to people trying to follow Trump’s pandemic advice but not quite brave enough to try Lysol).
- The biggest May industrial losers in Sioux Falls were lodging (–82%), drinking establishments (–74%), apparel (–71%… but hey, you never really needed that many shoes), and beauty shops (–63%… but hey, you’re beautiful just the way you are).
The economy may be bad, but hey, Sioux Falls, at least you’ve got your health.
One element of revenue loss I am not seeing is how much of that loss is permeant and how much is a deferral to spending later.