The economic impact of the coronavirus on sales tax revenue is hitting the city of Sugar Land harder than the city of Missouri City, according to the latest figures released by the Texas comptroller of public accounts.
The city of Sugar Land will collect $3.1 million in sales tax revenue in June, a 22.12% drop compared to what the city collected in June 2019.
Neighboring Missouri City will collect $824,840.50 in sales tax revenue in June, just 1.32% less than what the city collected during the same month last year.
The sales tax revenue each city collects in June is reflective largely on sales that occurred within the cities in April. This April, because of the coronavirus pandemic, stay-at-home orders and business restrictions were in effect.
Jennifer Brown, Sugar Land’s director of finance, said in a phone call with Community Impact Newspaper that the city is attributing the decline in revenue to the coronavirus. While a 22% decline is steep, Brown said the June collection is better than the worst-case scenario the city had prepared for.
She said the city had assumed a worst-case scenario would result in a 75% decline in sales tax revenue from retail, food and entertainment businesses, which makes up 60% of total sales tax revenue. This, combined with an additional reduction from oil- and gas-related businesses, meant the city was planning for a 55% reduction in sales tax revenue year over year for June.
“We were trying to come up with a worst case scenario of what we need to prepare for,” Brown said. “Thank goodness that didn't come to fruition. So, we were actually pleased with the allocation that we did receive. I never thought I'd be happy to see a 22% decline year over year, but much better than a 55% decline.”
For fiscal year 2019-20, which started in October, the city of Sugar Land budgeted for $50.3 million in projected sales tax revenue. From October through June, the city has collected $39.5 million.
Brown said the city is preparing for the coronavirus pandemic to affect sales tax revenue collections for the rest of the year. The city’s worst-case scenario has sales tax revenue for the 2019-20 fiscal year down 14% from what was originally budgeted, Brown said. During a budget presentation at the June 15 Missouri City City Council meeting, interim City Manager Bill Atkinson said Missouri City has been "fortunate" in respect to how the coronavirus has affected sales tax revenue.
In May, Missouri City saw a 7% increase in sales tax revenue compared to May 2019 and in June saw a 1% decline when compared to the same month last year.
“We only saw a 1% reduction in sales tax when we had thought that we might start seeing more of a reduction than that,” Atkinson said. “So, we're cautiously optimistic. However, we're going to watch this and see what occurs.”
For FY 2019-20, which started in October, 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. From October through June, the comptroller's office has returned approximately $8 million in sales tax revenue back to Missouri City. Both Sugar Land and Missouri City have an 8.25% sales tax. While 6.25% of both rates are retained by the state, Sugar Land splits up the remaining 2% into the city’s general fund and development corporations.
In Missouri City, of the remaining 2%, 1% is deposited in the general fund, while 1% goes toward the Metropolitan Transit Authority of Harris County. METRO then rebates 50% of sales tax collections back to Missouri City for street improvements and other mobility projects.
Sugar Land and Missouri City are both in the process of preparing their budgets for next fiscal year.
“We're still trying to figure out what scenarios and what assumptions we want to build our budget around,” Brown said. “But I think we'll stay conservative and not build in any overly optimistic assumptions of returning to normal just yet.”
