Payson's Economy Feeling The Pinch Of Reduced Spending


The Rim Country's rapid growth rate during the past several years came to an abrupt end in December 2007 and continued to decline the first five months of 2008 as sales tax revenue dipped into the negatives.

Except for one category, communication and utilities, all other major sales tax reporting areas have declined during the past six months. Construction took the biggest hit with a 35 percent decline, according to the Arizona Department of Revenue figures.

Klay Clawson, general manager of Foxworth-Galbraith Lumber Co. of Payson, said sales were fine last year but, since December, sales have slowed down.

The lumber company and has seen a slowdown in sales to contractors, where it gets a lot of its business.

Other areas took a hit in sales tax revenue.

Accommodations are down 17.2 percent, restaurants and bars 9.5 percent and retail has declined by 6.7 percent.

Total Payson sales tax revenue shows a decline of 2.3 percent during the first 11 months of fiscal year 2008, which began in July 2007, mostly because communication and utility costs have increased dramatically. That category shows a 47 percent increase when compared to the previous year, reflecting high propane gas and other cost increases.

Year over year sales comparisons held up during the early part of the 2007-2008 fiscal year, but started a deep decline beginning in December 2007, state figures show.

Payson experienced two boom years beginning in 2006, lasting through 2007.

The state uses a fiscal year from July to June as its reporting time.

While sales tax revenue is down for the fiscal year, the decrease is not as severe as homes sales, which are down 65 percent from 2005, according to figures from the Central Arizona Board of Realtors.

Payson's current sales tax of 8.72 percent is collected on all business activities that happen within Payson.

A monthly report, distributed by Arizona Department of Revenue, shows sales tax revenue for Payson comes from four main areas: retail, construction, restaurant and bar and communication and utilities.

Retail and construction sales tax makes up more than half of total revenue sales for the city. In fiscal year 2006, construction brought in $1.2 million in sales tax revenue, but has gone down 24 percent in the last two years.

Clawson said as consumer confidence goes back up there will be more building, which will further build confidence in the economy.

Shayne Dedman, bookkeeper at Payson Florist and Gifts, said last year sales at his shop were up 10 percent. This year he has not seen the same growth.

"This year, January was slow, but by Mother's Day we had caught up and are now close to even with sales from last year," Dedman said.

Inventory and utility costs are cutting into his profit, he said. From three years ago, the cost of goods are up 50 percent.

"Next year we will be doing a whole lot better," he said.

Payson experienced strong growth in sales tax revenue and home sales during 2005 and 2006 when homes were being built and sold at a rapid rate.

A city rate increase in January 2005 of .12 percent accounts for some of the growth in sales tax revenue, said economist Elaine Smith. Payson's 8.72 percent sales tax is made up of the state tax of 5.6 percent, Gila County's 1 percent tax and Payson's 2.12 percent tax.

Gila County saw growth in 2006, with an 18 percent increase in sales tax revenue. This increase is without the tax increase Payson had.

"In general, the area was growing in 2005 and 2006," Smith said.

For fiscal year 2008, sales tax revenue is going to come in lower around the state because 2007 was not a growth year, she said. This is the beginning of a decline.

"It is not like we have fallen off a cliff or anything," Smith warned.

Statewide the growth rate is expected to go down 2 to 3 percent this year. In 2006, the growth rate for the state was 16.4 percent and in 2007 it was 6.1 percent.

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