The city of Sugar Land will collect $4.2 million in sales tax revenue in May, a 9% drop compared to what the city collected in May 2019, according to figures released by the Texas comptroller of public accounts May 6.
The sales tax revenue cities will collect in May is based on sales that occurred in Sugar Land in March. This data begins to reflect the economic effect of the coronavirus pandemic as social distancing guidelines and business restrictions were put in place starting in mid-March.
Doug Adolph, Sugar Land’s media relations contact, said the city is attributing this decline in sales tax revenue in part to the coronavirus, but sales tax is volatile from month to month, and a portion of the decrease could also be attributed to one-time payments and audit adjustments received last year. In May 2019, Sugar Land collected $4.6 million in sales tax revenue.
Sugar Land’s sales tax revenue decline is on par with the 9.3% drop in sales tax revenue collected by the state as a whole in May. In a May 1 press release, the comptroller’s office said next month’s revenue, which will reflect April sales, is expected to show steeper declines as restrictions and stay-at-home orders were in effect for all of April.
For fiscal year 2019-20, which started in October for the city of Sugar Land, the city budgeted for $50.3 million in projected sales tax revenue. So far, the city has collected $36.4 million from October to May.
According to the city’s FY 2019-20 budget posted online, the city budgets sales tax revenue conservatively, as it is highly volatile and difficult to forecast. Sales tax revenue makes up 19.5% of the city’s total projected revenue.
Sugar Land has a 8.25% sales tax rate, of which the state retains 6.25% and 2% is returned by the comptroller’s office to the city. Of the 2% local share, 1.5% is deposited in the city’s general fund, 0.25% is allocated to the Sugar Land Development Corp. and 0.25% to the Sugar Land 4B Corp., according to the city’s budget.
Sugar Land Mayor Joe Zimmerman said in a webinar with the Fort Bend Chamber of Commerce on May 5 the city expects to see a 10%, or approximately $6 million, reduction in sales tax revenue because of the coronavirus. Despite this, he said the city remains in a good place financially.
“Bottom line, the city of Sugar Land, unlike some other cities and probably even some counties, we will be fine getting through this,” Zimmerman said. “We have been through Hurricane Harvey; we've been through the Great Recession ... and we came through. There will be impacts to our budget; there will be impacts to our employees.
Zimmerman said to maintain a balanced budget, city staff has implemented a number of measures to save money as they prepare for the economic effects of the coronavirus. Those measures include enacting a hiring freeze, which has been in effect since mid-March; limiting spending to essential items; reducing line-item expenses in each department’s budgets; and placing new initiatives and special projects on hold, Zimmerman said.
Sugar Land City Manager Mike Goodrum will be working with city staff to deliver the fiscal year 2020-21 budget in July. Zimmerman said uncertainty due to the coronavirus makes this already difficult process even more difficult.
“Our senior staff at the city, our departments, our entire city is focused on first and foremost, continuing to provide the essential services at the same levels that we've always provided them,” Zimmerman said. “Secondly, looking at what the impacts are going to be on next year's budget and how we will deal with that ... we're going to build in as much resiliency—you can translate that as flexibility—as we can.”
This chart shows sales tax revenue distributed to the city of Sugar Land for each month during FY 2019-20.