In Pearland, 2020 year-to-date sales tax revenue through August is 0.09% lower than it was in 2019. However, Pearland collected more revenue in May and June in 2020 than in those months in the year before. The largest source of city revenue is coming from stores that fall in general merchandise category, such as Walmart and Costco, McCarter said.
“In a nutshell, we have seen an increase in sales tax in most months with the pandemic,” he said. “That category has been resilient.”
The city has also collected more money from online sales, including from Amazon, he said.
While the city does not have Pearland-specific data that shows small businesses are suffering, it has allocated a portion of its Coronavirus Aid, Relief and Economic Security Act money to help small businesses stay afloat, McCarter said.
“In terms of real dollars, we recognize that national trends point to small businesses are struggling. We want to help them get back to where they were,” he said.
In Pearland, sales tax makes up 24% of the city’s general fund revenue. In Friendswood, sales tax makes up 25% of the city’s general fund revenue for the fiscal year 2020-21 budget. This year, Friendswood has seen its sales tax revenue increase by 3.36%, which makes it one of a few cities in the Houston area that have seen a positive increase in sales tax this year. However, Friendswood has not determined precisely how it brought in more sales tax this year, city officials said in an email.
“Some cities are very dependent upon their sales tax, and some cities aren’t because they don’t get as much sales tax,” said James Thurmond, a graduate professor in public administration at the University of Houston and a former city manager.
Friendswood and cities like it are benefiting from fast food chains, as those are doing well, Friendswood City Council Member Brent Erenwert said. Friendswood opened a Chick-Fil-A, a Jersey Mike’s and a MOD Pizza within the last year. The city also benefits from being a bedroom community, Erenwert said.
“Look at us compared to other cities. A lot of cities were relying on their sales tax or their bars,” he said.
While Pearland has brought in more sales tax revenue than anticipated this year, the city has made intentionally conservative estimates as to how much sales tax revenue it will bring in during FY 2020-21, McCarter said.
“In an effort to be conservative, we are talking about the future and not the past,” he said.
Thurmond warned cities to be conservative when it comes to budgeting next year’s sales tax revenue.
“We haven’t hit the low point yet,” he said. “I would not be very positive right now. ... I would be cutting back.”
Thurmond further said that the pandemic will likely get worse before it gets better, he said.
“The worst was expected this past spring, and people are overly optimistic. The worst might not have come yet,” he said.