While sales tax receipts are rising in Leander with tripled annual projections, the pandemic cut Cedar Park hotel tax revenue in half.
County and statewide orders closed bars, retail stores, restaurants, gyms, salons and other nonessential businesses in mid-March while stay-at-home orders were in effect. Business owners were forced to temporarily close or quickly adapt.
Ronnie Swingler, owner of Leander Nutrition, said her business switched to curbside-only orders for several weeks during the pandemic until 50% capacity was allowed. The Leander shop sells healthy smoothies, shakes and teas. Extensive cleaning and new safety procedures kept staff and customers safe.
“Our community is coming strong for us and helping to keep us afloat,” she said.
Through personal and business changes over recent months, Swingler said she and her employees follow the motto of the shop’s neon sign: “Positive vibes only.”
“We just try to be positive and uplifting,” she said. “And really try to be a positive place for our community in this crazy time especially.”
As of July, Leander has tripled its sales tax growth projections. The city typically plans for a 5% annual increase, but the projected increase is near 15% in fiscal year 2019-20, according to Robert Powers, the city finance director.
According to city data, March was the second-highest sales tax month in Leander’s history, but March was also when the pandemic was declared and stay-at-home orders were called. Increased online sales may be a factor to Leander’s growth. Online sales give use tax revenue, which is the same rate as a sales tax, to the location where the sale was delivered, according to the state comptroller.
As Leander plans its next budget, Powers said the city will continue its “normally conservative budgeting philosophy.”
Sales tax significance
Leander’s monthly 1% sales tax revenue showed considerable increases in year-over-year comparisons, but Cedar Park’s 2% revenue was nearly unaffected between 2019 and 2020.
Sales tax revenue accounts for 30% of Cedar Park’s general fund, according to the city.
In mid-May, Cedar Park estimated it will lose between $2.4 million-$4.4 million in its $21.5 million general fund as a result of COVID-19. The city—which is home to more businesses than Leander—projected the drop based on sales tax revenue dips between April and September.
Leander relies on sales tax to fund about 15% of the city general fund budget, according to the city.
Sales tax receipts dropped in all economic industries, according to Texas Comptroller Glenn Hegar in a July news release. It is noted that social distancing requirements were relaxed across much of Texas in May, which allowed for increased spending.
Rebooting local, state or national economies depends on rebuilding consumer confidence, according to Stuart Greenfield, an economic adjunct professor at Austin Community College.
Greenfield said younger populations are more comfortable with returning to bars, restaurants and regular activities. But older populations are more likely to stay at home, which is important to note because they represent a large portion of income, he said.
“Until you resolve the COVID-19 [pandemic], there is too much concern, too much fear especially for older people,” Greenfield said.
Greenfield said growth and stabilization in sales tax revenue would be a positive indicator of a recovering economy.
“It’s going to play havoc with the economy because of the ups and downs that will occur,” Greenfield said.
For annual events, such as South by Southwest Conference & Festivals, Austin City Limits Music Festival and the Austin Film Festival, eventgoers often look to cities like Cedar Park for cheaper or more available accommodations.
Texas hotel occupancy tax revenue dropped 63% in April, 86% in May and 61% in June when compared to year-over-year revenue. The May hotel tax decline is the steepest drop in state history for the tax, according to the state.
These earnings fund city tourism promotion and is collected from cities or municipalities when guests stay at hotels.
HOT revenues do not contribute to a large portion of either city’s revenues; however, hotel tax revenues also represent fewer hotel guests.
With only one hotel, Leander has reaped $14,067.92 in HOT revenue since January. Cedar Park reaped about $950,000 in HOT revenue last year.
In Leander, the Old Town Street festival was postponed and later canceled.
Much of Leander tourism is based on basketball and baseball tournaments, so hotel stays have declined without those events, said Leander Chamber of Commerce President Bridget Brandt. Sporting events have increased hotel stays minimally, but hotel stays for major events should return in 2021.
“Today I would say that there is little to no tourism happening because of COVID[-19],” she said.