Town Sales Tax Revenue Drops To 2004 Levels

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Payson’s sales taxes for the first four months of this fiscal year took a record 42-percent drop compared to the same four months last year, according to just-released figures.

The town took in $1.9 million worth of sales tax during the first four months of this fiscal year — beginning in July and ending in October — a sharp drop from the roughly $2.7-million average for that same period in the past three years.

If that trend continues, Payson would end the year with $5.7 million in sales taxes, compared to $7.3 million in the fiscal year that ended last July. That represents a roughly 22-percent decline from the fiscal year that ended in July.

Sales taxes in town so far this year have essentially returned to the town’s historic average.

Some retailers predict that sales figures will show a steepening drop in November.

“They’re hurting gators,” said Rim Country Regional Chamber of Commerce manager John Stanton, of the impact of slowing sales on Payson retailers. “But this is a very resilient town — and many folks have been through this before.”

In fact, Stanton said the town had been rife with rumors of store closings, spurred by a frightened rumor mill.

“All of that is craziness. We need to stay positive and support our merchants and the folks who have invested in this community. It gets back to be loyal, buy local,” he said — especially in the winter months when local retailers depend on year-round residents.

An analysis of more than a decade of sales tax numbers demonstrates that the three boom years have made the decline look steep — although sales remain consistent with the long-term average.

The $1.9 million in sales taxes for the first four months of the current fiscal year compares to an average of $2.7 million for the three previous years.

However, sales tax receipts averaged just $1.7 million for those four months in the six-year period from fiscal 1999/2000 to fiscal 2004/05.

In retrospect, the three-year period before the current recession stands out as the oddity, thanks to a boom in sales, tourism, real estate and construction as the housing bubble swelled.

In addition, right at the start of that big run-up in local sales tax revenue, Payson boosted its sales tax levy from 2 to 2.12 percent, which accounts for a little bit of the sharp jump in total sales tax that started in fiscal 2005/06.

An analysis of the full-year sales tax figures for the past decade shows less dramatic variation as the month-to-month shifts leveled out.

The 42-percent drop in the July-October period this year represents the largest one-year decline on record, although receipts dropped by 22 percent in that same period in fiscal 2001/02.

Full-year figures have proven more stable than first-quarter figures in the past decade. They also document a long, steady increase, a sharp three-year jump, and a return this year to the historical average.

For instance, sales taxes rose just 85 percent in the 10-year span between fiscal 1996 and fiscal 2005 — about 8 percent annually on the average. In that span, tax collections dropped just once — a 2-percent drop in fiscal 2004.

Sales tax receipts jumped 13 percent in fiscal 2005 and 16 percent the next year. The sharp rise then stalled with a 3-percent increase in Fiscal 2007 and a 3-percent drop in fiscal 2008 — the 12 months ending in July.

For the first four months of this year, they’ve essentially dropped back to the fiscal 2005 year level when year-end receipts totaled $6.1 million.

Perhaps surprisingly given the gloom in the construction and housing market, those sectors have contributed about the same share of sales taxes before, during and now after the three-year boom.

For instance, retail sales accounted for between 47 and 50 percent of the sales tax in October of 2008, 2007 and 2004. Construction peaked at 20 percent of the sales tax in 2004 — but accounted for just 15 percent in 2007 and 2008.

Restaurants varied from 7-9 percent of total sales taxes, real estate from 4-6 percent and manufacturing from 1-4 percent. The biggest shift in percentage share was for utilities and communications, which accounted for 7 percent in 2004, 8 percent in 2007 and 11 percent this year.

Still, Stanton said the rumors of declines and closures exceed the actual numbers.

“I received a visit and three phone calls last week from businesses that were rumored to be going out of business and they all informed me that business is doing OK. One of our members had their 10-year-old daughter come in and say ‘Daddy, are we closing our place?’ We need to stop doing the rumor mill the wrong way,” he said.

The prediction is that business will improve come spring, when the town launches new events like Sawmill Festival featuring family-oriented logging contests and activities, and when the Payson Rodeo celebrates its 125th year.

The key for many businesses will be to hang on through the winter, which will depend on the support of local residents — this year more than ever.

“I don’t want to see one more empty store window in this town,” he said.

“The rest of us have to realize that these businesses have put capital into our town — like Big O Tires putting in a lift to do tire rotations in town. So I’m not going to go down to the Valley if I need my tires rotated. We need to support businesses here and give them all the help we can.”

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