The sales tax revenue Missouri City collects in May is based on sales that occurred within the city in March.
Many cities, including neighboring Sugar Land, saw a decline in sales tax revenue collected in May as the data began to reflect the economic effect of the coronavirus pandemic. In Texas, social distancing guidelines and business restrictions were put in place starting in mid-March.
Jon Hockenyos, founder and president of economic analysis and public consulting firm TXP, attributed Missouri City’s increase in sales tax revenue to people shopping locally since they are not commuting out of the city for work.
“Now that people aren’t going to work, they're a little more inclined to shop in the community in which they reside, whether that's actually going to the grocery store—and, in my wife's case, buying everything under God's green Earth—or buying stuff online,” Hockenyos said during a presentation at the May 18 Missouri City City Council meeting.
Hockenyos projects that 29% of people working in the Missouri City area will experience some period of joblessness because of the coronavirus, which will have a lasting impact on sales tax revenue in the city.
“One month is not a trend,” Hockenyos said. “I do not expect this number to stay positive for long. But it was certainly a surprise to me, and I think the folks on staff as well, that [sales tax revenue] came in positive for the month of March.”
Using joblessness estimates by sector of the economy, Hockenyos presented a baseline forecast that shows Missouri City seeing reduced sales tax revenue in fiscal years 2019-20 and 2020-21, returning to precoronavirus figures in FY 2021-22 and having steady growth after that.
For FY 2019-20, which started in October 2019, Missouri City estimated its general fund would receive $9.6 million in sales tax revenue and rebates, according to a copy of the city’s budget available online.
There is a 8.25% sales tax rate in Missouri City; the state retains 6.25%, and 2% is returned to the city by the Texas Comptroller’s Office. Of the 2% local share, 1% is allocated to METRO, and the other 1% is deposited in the city’s general fund. METRO rebates 50% of sales tax collections back to Missouri City for street improvements and other mobility projects.
From October 2019 through May, the comptroller's office has returned $7.2 million in sales tax revenue back to Missouri City.
The state of Texas saw a 9.3% drop in sales tax revenue collected in May. The comptroller’s office said in a press release that June’s statewide sales tax numbers are expected to show steeper declines, as restrictions and stay-at-home orders were in effect for all of April.
Sales tax revenue projections are important as Missouri City staff begin the budget process for FY 2020-21. According to the City Charter, the city manager must submit to council a proposed budget on or before Sept. 1.
“This is a process,” Hockenyos said. “Staff will tell you the numbers changed when the May sales tax figures, which reflected March, came out. I wouldn't be surprised if they changed again next month and on from there, and on from there.”
He continued, “What we've got to do is stay on top of it so we give you the best possible information we can, that's as up-to-date as we can make it, as you are going through the process of making spending plans and setting budgets for the coming fiscal year."
