Where Does the Revenue Go?
Last week, I received an email from a friend asking how increases in sales tax are being used and how they can’t be used. It was a great question that deserved a proper response, and I thought I would include it here for others to see as well.
Regarding the facts and figures I post, what I try to convey is the general health of the community’s economy—which doesn’t necessarily translate into additional funds for the City or EDC. The gross sales post you mentioned (Q1 18 gross sales info is now available for Marble Falls: overall, we saw an 8.09% increase over Q1 17 sales, with the strongest growth coming from wholesale trade (+36%), manufacturing (+41%), and construction (+111%)–that’s not a typo!) actually has no bearing whatsoever on either our budget or the City’s budget, since our budgets come from sales tax and not gross sales. In fact, the City has to project about 4.0 – 4.5% annual sales tax growth in order to balance their budget, and they’re about $85,000 short (1.4%) of that mark this year (FY 17-18). The EDC can be more conservative, so we don’t budget any growth—and we’re about 2.09% ahead of schedule for the year. This amounts to a little over $44,000 in new sales tax revenue, which just gets absorbed into our fund balance and helps lessen the shortfall we’ll see over the next couple of years. (By the way, the shortfall is due in large part to the receipt of bond funds in one year and then spending those funds in subsequent years.) So, long story short, what might look like big gains in sales tax doesn’t really translate that way. Big gains in property tax, on the other hand, are what enable the City to increase the street maintenance budget, add emergency personnel, buy fire trucks, etc. Property tax, of course, doesn’t help or hurt the EDC since we derive no funding from it.
I’ll add to my response that the recent gains we’ve seen in property tax have been mitigated to some extent by the City’s conservative approach to setting the tax rate. If the City Council were to maintain the tax rate or even adopt the rollback rate, there would be at least some additional funds for some of the extras that I hear people asking about: more residential sidewalks, increased park maintenance, etc. As it stands today, however, Council and staff are trying to balance the needs and wants of the citizens with keeping those citizens’ tax bills as low as possible—and I applaud them for their efforts.
As always, I’m happy to visit about these or other issues of community interest. Please let me know if you have any questions, comments, concerns, or observations.
