Sugar Land adopts a nearly $231 million budget; city’s property tax rate edges up

Of that $1.1 million shortfall, $600,000 is the result of lower property tax revenue due to the adoption of the lower than recommended tax rate. The other $500,000 reflects projections for lower sales tax revenue. Brown said the lower projections come from sales tax data recorded in recent months.

Sales tax revenue for fiscal year 2016-17 is 7.6 percent lower than last year, city officials said. Sales tax revenue is expected to remain flat in FY 2017-18.

Sales taxes are flatlining for several reasons, including the economic downturn of the oil and gas industry and the rise in online shopping, Alderete said.

“[Consumers] are spending more of their money on online purchases, and we may not be getting that sales tax revenue,” he said. “All those things kind of come together to impact what’s happening in our sales tax [collections].”

It is estimated $48.72 million will be collected in sales tax revenue in FY 2017-18, Brown said. The city will allocate $36.5 million of that to the general fund, and the remaining $12.22 million will be diverted to the city’s corporation funds, which are used for economic development, Brown said.

The widespread shutdown of businesses during Hurricane Harvey will most likely cause a dip in the city’s sales tax collections, but the amount lost will not be known until November, Alderete said.

“At this point, based on what we’ve seen in the last couple of months, we don’t foresee a recovery [in sales tax],” Brown said.

In a budget workshop, staff provided a number of potential options for budget cuts, including eliminating special events, reducing hiring, and reprioritizing capital improvement projects.

The council is scheduled to vote on these possible modifications later this month.