Sales tax revenue rebounds slightly2/19/09

Numbers still down, but not as much

Feb. 19, 2009

By Greg Elias

Observer staff

In a small ray of sunshine amid the spreading economic gloom, local sales tax revenue fell during the fourth quarter, but by a much smaller amount than in recent periods.

Williston received $684,146 from the local option tax for the three-month period ending

Dec. 31. That is down 1.1 percent from the same quarter in 2007. But it is a much smaller drop than in the previous two quarters, when sale tax revenue fell by 11.8 percent and 8.9 percent.

Town Manager Rick McGuire said he was mildly surprised by the rebound in sales, which comes amid steep declines in tax revenue at the state and national level.

But he warned the data may be skewed by factors such as tardy tax returns by businesses or by going-out-of-business sales by big-box retailers Circuit City and Linens ‘N Things.

“I can’t really draw too much of a conclusion based on this quarter because some variations defy logic,” McGuire said.

Williston has for the past six years enjoyed millions of dollars in annual revenue from the 1 percent local option tax, which is tacked onto the 6 percent state sales tax. Proceeds fund about a third of the municipal budget and help reduce the property tax rate.

But the levy has proven to be a fickle revenue source over the past two years. In 2007, the state changed rules governing what is taxed, with products that are bought in Williston but shipped elsewhere no longer generating income for the town.

Revenue, which had steadily risen in prior years, began to erode with the rule change. Each quarter in 2007 produced less revenue than the same period a year earlier.

The story was much the same in 2008, with falling revenue recorded in three of four quarters. The decreases were perhaps exacerbated by the deepening national recession, which has been blamed in part for driving both Circuit City and Linens ‘N Things — each had an outlet in Williston — out of business.

But it appears the biggest of the big-box retailers in town may be boosting Williston’s fortunes. Many economists believe Wal-Mart is benefiting from the recession as people economize by shopping at the store.

Figures released Tuesday appear to back up that theory. Wal-Mart reported net sales in the U.S. rose 6 percent in the fourth quarter. Sales for the year are up 6.8 percent. The company said it created 60,000 jobs in 2008.

Wal-Mart does not release figures for individual stores, so it is unclear to what extent the Williston outlet has shared the company’s good fortune. But based on anecdotal evidence — it’s not uncommon to encounter checkout lines, even during normally slower times on weekdays — business is booming at the store.

“Our goal is to save people money so they can live better,” said Wal-Mart spokesman Steven Restivo. “That general goal has never been more relevant than it is today.”

For all of 2008, Williston received $2,379,679 in sales tax revenue. That is a 5.2 percent drop from the previous year and a whopping 22.3 percent decrease from 2006, the peak year for sales tax revenue.

The small revenue rebound in the fourth quarter eases concerns that the sales tax would leave a large hole in the municipal budget. For the fiscal year ending July 1, McGuire said sales tax revenue is running about $50,000 below estimates. He said such a small shortfall can be erased using reserves, so there will be no cuts in services.

McGuire expressed guarded hope that the latest tax figures, combined with some other key indicators, could signal the local economy will not experience the deep recession seen in other parts of the country. He noted the property tax delinquency rate is still below 1 percent and home values remain substantially above the town’s appraised values.

“There are lots of positive things,” he said. “You can’t get worked up about all the negative things.”