“We’re definitely adapting. Everyone is just rolling with it,” owner Heather Scharbor said.
While the cities of Pearland and Friendswood have collected more sales tax revenue for some months in 2020 compared to 2019, those are mostly from big-box businesses, Pearland interim Finance Director John McCarter said. Meanwhile, many of the small businesses in the area are bringing in less revenue and struggling to keep their doors open.
“We know there are going to be businesses that shut the doors left and right, and it’s a sad thing to watch,” said Paul Davis, the owner of Kid 'N Play Indoor Playground in Pearland.
Small businesses take the hit
After seven months of being closed to the public, Kid 'N Play is considering closing for good, Davis said.
The business was closed for two months due the governor’s orders. Even once the state gave the green light to reopen, Davis still kept the family-owned business closed, as there is no way to social distance.
“People aren’t ready to risk bringing their kids inside,” he said. “I don’t want to put your kids at risk, either.”
Summer is typically Kid N Play’s busiest time of year. The lack of revenue hurt the business Davis has operated for years.
“The hardest part for us right now is that we know we had a successful business that has done well for us for four years, but we don’t have an option right now where we know what we are supposed to do,” Davis said.
To stay afloat, businesses are having to adapt, Friendswood City Council Member Brent Erenwert said. Erenwert also owns Brothers Produce.
"You used to have to build a business to be recession-proof; now you’ve got to be pandemic-proof,” Erenwert said.
Between Us Tea Room and Wine Lounge in Friendswood has made changes to keep the business afloat, owner Renita Bayliss said. The tea room has added brunch and has had more people reserve the restaurant for private events.
“Things are climbing a bit. It just depends on the day,” she said.
Bayliss hopes the holiday season helps the business, as does Norma Guerra-Martinez, who owns Le Papillon Children’s Boutique in Pearland.
“That is the only thing we have going for us. We are hoping it will get us out of the red and into the black,” Guerra-Martinez said.
Le Papillon sells children’s clothing and toys. The biggest help for the boutique has been being a Pearland Chamber of Commerce member, she said.
“They do come in and check on us, and they call us,” Guerra-Martinez said. “That is how you keep a community together.” Sales tax revenue soars
While small businesses are struggling to keep their doors open, big-box businesses like Walmart and Costco are bringing in even more customers, resulting in more sales tax revenue for cities, McCarter said.
In Pearland, 2020 sales tax revenue through August is 0.09% lower than it was in 2019. However, the city collected more revenue in May and June than it did the year before.
The city has collected money from online sales, such as Amazon, McCarter said. While the city does not have city-specific data showing small businesses suffering, it has allocated a portion of its federal aid 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%. However, Friendswood cannot formulate 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, Erenwert said. Friendswood opened a Chick-fil-A, Jersey Mike’s and 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.
Pearland conservatively estimated its sales tax revenue for FY 2020-21, McCarter said.
“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.”
What’s next
Thurmond warned the pandemic may cause the economy to 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.
Erenwert agrees the next few months may be the hardest for business owners.
“I keep telling people that the next 90 days are going to be the hardest, because the PPP is spent and the rent is due,” he said.
Allegro Music Academy lost around half of its students after the pandemic hit in the spring. While business typically picks back up in the fall, Allegro has not had very many new students, Scharbor said.
“I think it has been really stressful for parents with [school] partially in person and partially virtual,” Scharbor said.
Offering orchestra practice outside is not the only way the business has adapted to COVID-19: The business started offering virtual lessons during the pandemic as well.
“Especially during the pandemic, it is demoralizing and scary and depressing and a million things, but I hope our program has provided emotional support,” she said.
