City worries about sales tax

Jeff Harrison
The Edmond Sun

EDMOND February 14, 2008 11:41 am

— Recent sales tax returns for the City of Edmond show an increase of 4.5 percent over the first eight months of the city’s fiscal calendar. That type of increase might make several Oklahoma communities jealous, but it is a cause for concern for Edmond officials.
City Manager Larry Stevens said the city projected a 7 percent increase in sales tax returns for the 2007-08 budget, but believed the final numbers likely will fall short.
The city staff based the projections on last year’s numbers, which showed an estimated increase of 8.4 percent, at the time the staff was preparing the budget. But, the year-end total for the 2006-07 fiscal year showed an increase of more than $2.3 million in sales tax collection or 6.29 percent.
“We thought it was a conservative estimate,” Stevens said. “Last year we were 8.4 percent ahead and we thought 7 percent was a good number.”
The lower-than-expected return in sales taxes will force some change to the city’s future budgets. Stevens said smaller increases could result in a reduction of up to $1 million in the general fund and $1.5 million overall in the city budget. Despite the potential shortage, he did not expect any changes across the board in the current budget, but said city staff would look at departmental adjustments.
The sales tax returns also will affect the budget for the next fiscal year, which begins in July, as well as the city’s five-year financial plan. Stevens said the city budget will include significantly less budgeted revenue.
While the figures are problematic for the city’s budget, Stevens said the community is in good shape. According to the Edmond Economic Development Authority, total sales tax receipts have increased 36.51 percent over the past five years and 118.57 percent during the past 10 years.
“Our community has been great and our sales tax collection is the envy of Oklahoma and the Midwest. We’ve been very fortunate,” Stevens said.
The city manager credited the decline in construction of single-family homes as one of the primary causes for the lower gains in sales tax. Last year, Edmond saw a 20 percent decline in the number of single-family residential building permits, and a 31 percent drop since 2005.
“What it means is Edmond is not immune to slowdown,” Stevens said.
Toni Weinmeister, EEDA associate director and director of business development, said while the residential home building market has slowed down, commercial construction has increased during the past year. The city issued 55 commercial building permits in 2006 and 72 in 2007.
“The population growth and our demographics show we can support more commercial construction,” Weinmeister said. “With more rooftops comes more retail.”
Weinmeister also said the smaller gains in sales tax revenue could be due to consumers going elsewhere for their purchases, and an increase in online shopping.

jharrison@edmondsun.com | 341-2121, ext. 119