League City projects sales tax revenue losses amid coronavirus

While it is too early to tell how the coronavirus COVID-19 has affected League City’s sales tax revenue, the city’s second-largest revenue source, staff has put together loss projection scenarios that show the city could come up to $660,000 short of what was budgeted in September. (Courtesy Fotolia)
While it is too early to tell how the coronavirus COVID-19 has affected League City’s sales tax revenue, the city’s second-largest revenue source, staff has put together loss projection scenarios that show the city could come up to $660,000 short of what was budgeted in September. (Courtesy Fotolia)

While it is too early to tell how the coronavirus COVID-19 has affected League City’s sales tax revenue, the city’s second-largest revenue source, staff has put together loss projection scenarios that show the city could come up to $660,000 short of what was budgeted in September. (Courtesy Fotolia)

While it is too early to tell how the coronavirus has affected League City’s sales tax revenue, the city’s second-largest revenue source, staff has put together loss projection scenarios that show the city could come up to $660,000 short of what was budgeted in September.

League City’s sales tax revenue budget for fiscal year 2019-20, which began Oct. 1 and runs until the end of September, is $20.47 million. As of March, the city had secured $7.18 million in sales tax revenue from sales conducted October through January. The amount put the city slightly ahead of the pace required to meet the budgeted goal of $20.47 million by the end of FY 2019-20, according to an April 6 memo from Angie Steelman, the city's director of budget and project management.

However, beginning next month, the city expects to see a downward trend in sales tax revenue collected, according to the memo. The sales tax revenue the city collects in May will be from sales made in March, which is when the outbreak began in Texas.

“Given that the first cases of COVID-19 were reporting in Texas in March 2020, disruption will start in the city’s May collections. The June collections, which are for April sales, will be the first full month reflecting the effect of businesses’ reduction and change in operations,” Steelman wrote in the memo.

To predict how the full year’s sales tax revenue might be affected, staff put together two scenarios. One features a 10% maximum monthly loss relative to budgeted sales tax revenue, and the other features a 15% maximum monthly loss. Both scenarios assume an economic bounce back beginning in July with sales tax revenue returning to near budgeted levels by the end of the fiscal year.


In the 10% scenario, the city would collect $20.21 million in sales tax revenue, which is $254,000 less than budgeted. In the 15% scenario, the city would collect $19.81 million, or $662,000 less than budgeted, the memo reads.

Actual losses could be greater or less than what the city projects. Steelman said it is too early to tell how the coronavirus will affect sales tax revenue.

Hurricanes lead to sales tax revenue downtrends, which the city tracks and uses to project revenue for each new major storm. However, the coronavirus has had a much longer effect on the market than any hurricane could, she wrote.

“Looking ahead, it is difficult to say for certain how this pandemic will impact our sales tax revenue, given there is no precedent,” Steelman wrote. “Staff does not have data to show the consumer spending patterns in this new normal and how that would affect sales tax.”

City staff will monitor incoming sales tax revenue monthly and look for patterns to further refine projections, Steelman wrote.
By Jake Magee

Editor, Bay Area & Pearland/Friendswood

Jake has been a print journalist for several years, covering numerous beats including city government, education, business and more. Starting off at a daily newspaper in southern Wisconsin, Magee covered two small cities before being promoted to covering city government in the heart of newspaper's coverage area. He moved to Houston in mid-2018 to be the editor for and launch the Bay Area edition of Community Impact Newspaper. Today, he covers everything from aerospace to transportation to flood mitigation.