Morgan Hill was among the majority of cities in Santa Clara
County that enjoyed a rare increase in sales tax revenues during
the first quarter of the year.
Morgan Hill was among the majority of cities in Santa Clara County that enjoyed a rare increase in sales tax revenues during the first quarter of the year.
As of the end of March, Morgan Hill’s three-month sales tax revenues – which account for 1 percent of retail sales in the city – were more than 6 percent higher than they were the first quarter of 2009. The city collected about $1.2 million during the quarter, according to staff.
Plagued by the recent recession – that local economists said earlier this week ended in July 2009 – that has resulted in dramatic losses of funding from sales, property and hotel taxes, it was the first time Morgan Hill saw a year-over-year sales tax revenue increase in nearly 18 months, city finance director Kevin Riper said. In the last two years, the figure grew only one quarter – in 2008 – and by less than 1 percent.
City staff expected the region to begin seeing signs of revenue recovery earlier this year as they were preparing the budget for fiscal year 2009-2010, Riper said.
“It’s consistent with the (latest) budget forecast,” Riper said. “Pretty much every category (of retail sales) is bouncing back.”
The first quarter of 2009 noticed a steep decline of more than 23 percent since the same time a year earlier. Total sales tax revenue collected by the city was about $4.6 million in 2009, compared to a total of about $6.1 million in 2008.
Sales tax revenues pay for police, fire, roads, parks and other public services.
Many retailers – especially corporately owned ones – do not disclose their sales performance. However, two of the city’s largest retail stores reported an increase of sales since the same time last year.
Target, located at the Cochrane Commons shopping center, reported a 14 percent increase in sales at the local store, according to manager Joe Silva. The highest-selling area of the store is the grocery department – which is not taxed and therefore does not provide revenue to the city.
Plus, “cart sizes” are up by about 4 percent, he added, indicating customers are purchasing more items.
Target’s situation is unique because one year ago coincides with the opening of Walmart across the street. That retail giant temporarily siphoned customers away from Target.
“It took a while for the hype to die down (with Walmart),” Silva said. “We lost some customers but they’ve started to come back in.”
Another local retailer whose sales have improved in the last year is Home Depot on East Dunne Avenue. Manager Patrick Sandomenico, Jr., declined to disclose any percentages or figures, but attributed the increase to the store’s conscious efforts to create loyalty with rewards for repeat customers, lower prices on common household items, and new products such as a Martha Stewart brand.
He added he has seen a new attitude among shoppers since the recession started.
“Consumers are talking more about shopping locally, and they want to keep their tax dollars in the community,” Sandomenico said.
Plus, the local store has widened its presence in the community, by participating in events such as the Independence Day parade and Mushroom Mardi Gras.
“We’re letting the community know we want to support them inside as well as outside the store,” Sandomenico said.
Still, the city’s largest portion of sales tax revenues comes from the transportation sector, despite the closing of Courtesy Chevrolet last year, Riper said. Earlier this year a new RV dealer – Pan Pacific – took the place of one of the city’s top five sales tax generators, Alpine RV which also closed last year. Sales at Pan Pacific have contributed to the increase in sales tax revenue, but have not completely replaced the loss from Alpine’s closing, city manager Ed Tewes said.
Also encouraging for the city is the sudden increase in hotel tax revenues in July, Riper said. Hotel tax revenue collections for that month were about $84,000 – or 13 percent higher than July 2009. For the entire fiscal year the city has budgeted $936,000 in hotel tax revenues.
But city staff are still cautious about their five-year forecast. Property tax revenues are still expected to decline next year, and the city still expects to spend from its reserve fund each of the next five years.
“It seems to be getting better but it would be premature to say it’s a recovery,” Tewes said.
Every city in the county except Campbell gained a yearly rise in sales tax revenues after the first quarter, according to a recent report from MuniServices. The city of Gilroy saw a 4 percent increase. Monte Sereno saw the sharpest rise of 44 percent more sales tax revenue than one year ago.
However, the county’s unincorporated areas suffered a decline of nearly 3 percent in sales tax revenues.
