City sales tax plunges 21.5% in October

“We’re in the process of looking at it,” said Mary Mannix, Springfield Finance director, after confirming the slide. “We don’t have any real answers.”

October’s plunge is the largest sales tax dip recorded in the city since a 21.5 percent slide in February 1999. It also marks back-to-back months of negative growth – last seen in April and May last year – as September sales slipped 13 percent. But unusually high sales tax revenue in August (23 percent) has kept annualized figures barely in the black. From July through October, sales tax revenue growth is less than 1 percent; the city has projected a 3 percent increase for the full fiscal year, which ends June 30.

Ryan Mooney, Springfield Area Chamber of Commerce manager of business development, has noticed the drastic swings, but he, too, can’t place a finger on what causes them. Mooney a received the city’s monthly sales tax revenue reports for more than a year for analysis purposes.

“There are some weird jumps,” he said, pointing to a 32 percent increase in April 2003. “I don’t know what that’s all about.”

Volatile monthly sales might be a trend with which cities have to cope. Springfield has seen double-digit swings in four of five months this fiscal year. There were only three such months during the entire 2003-04 fiscal year.

“I’ve talked to (Missouri) Department of Revenue and they told me the city is experiencing the same trends that are being experienced around the state,” Mannix said. “We may see a big decrease one month followed by an increase the next month.”

Springfield’s figures reflect statewide sales to a degree. Statewide sales and use tax collections decreased 7.5 percent in October, but are still up 1.1 percent year-to-date, according to Missouri Department of Revenue’s October general revenue report.

Mannix said the upside locally is, being only five months into the city’s fiscal year, October’s poor results don’t necessarily jeopardize the city’s 3 percent projected annual sales tax growth.

“The positive thing is that we are not having this conversation in March,” she said, adding that city officials are still concerned.

“It concerns me because I drive around Springfield and I think, ‘Well, the retail activity doesn’t appear to be flat here,’” she said, referring to full parking lots at retail stores. “What I feel goes on in the community versus the numbers that we’re seeing, the two don’t correspond to me.”

One possible factor might be online shopping, which goes untaxed locally. According to industry studies, online shopping increases during the holidays, and that growing market segment buys earlier than their store-shopping counterparts. (See “Online buyers shop early for holidays” on page 31.) A November study by Shop.org/BizRate.com shows 32 percent of consumers plan to do more of their holiday shopping online this year and 53 percent of those shoppers planned to start by early October.

A heavy online shopping spree in October could have cut into Springfield storefront sales, but local analysts haven’t seen proof of that yet.

“Everybody has a different opinion about those things,” Mooney said. “We just don’t have any concrete evidence one way or the other to point to any trends there.”

Mannix said one thing for sure is that if sales tax revenues don’t rebound, city departments will be forced to make cuts.

“Our sales tax revenue is close to 50 percent of our operating budget,” she said, adding that it also pays for capital improvements. “If necessary, we may ask departments to do what they can to cut back on expenditures.”

If cuts don’t cover the difference, the city would pull from its 10 percent budget reserve, which exceeds $8 million.

“It is specifically for something like this because sales tax is a volatile revenue source,” Mannix said. “Sales tax can just drop immediately.”

[[In-content Ad]]