City predicts sales tax revenues will set a new record this year
City officials are so confident that sales tax revenues will
continue rising this year, they
’ve projected record-breaking revenue and increased their sales
tax projections in the budget by $100,000.
City officials are so confident that sales tax revenues will continue rising this year, they’ve projected record-breaking revenue and increased their sales tax projections in the budget by $100,000.
And they’ve done so for a good reason. Sales tax cash receipts are up 34.1 percent to $1.36 million for the first quarter this year from the same time period last year, and officials predict the city will earn a record $5.5 million at the end of this fiscal year, comprising about 30 percent of the city’s total projected revenues, according to Finance Director Jack Dilles.
Sales taxes go into the general fund and represent Morgan Hill’s single largest revenue source. Fortunately for the city, which faced a $1.2 million deficit this year until learning more than $600,000 of Vehicle License Fees would be paid back by the state, the sales tax increases don’t show signs of slowing down.
Mayor Dennis Kennedy explained the city’s sales tax revenue reached its peak in the fourth quarter of 2000, when the figure climbed to $1.4 million.
After the record-setting quarter, the 9/11 tragedy and dotcom bubble burst soured the local economy with the loss of thousands of jobs regionally. Morgan Hill’s sales tax revenues slowly declined each year, reaching a low point in the second quarter of 2003, at $1.05 million – sliding even lower in the first quarter of 2004, to only $1.008 million, according to city records.
The good news is the city is seeing a sales tax recovery, the mayor said. Revenues started bouncing back to $1.3 million the second quarter of 2004.
In 2003-04, total tax revenues jumped 17 percent – a big boost from a 6 percent drop during the previous year and an 11.9 percent loss during 2001-02 – but the revenues still lagged behind 2001’s record setting revenues
Kennedy attributes much of the boost in the city’s sales tax revenue to the city’s ability to focus on economic development and attract new businesses. He used the new Ford auto dealership and Home Depot as examples of big breadwinners for city sales tax that opened in 2004.
The new Ford dealership appears to be especially successful.
“Every month, we have sold more cars,” said Jerry Feldman, general manager of the Ford Store. “Every month is better than the last.”
Feldman, who is a new resident of Morgan Hill, said the auto dealership was recognized in May as the largest Ford dealership in the Bay Area, having sold 158 new vehicles and 31 used vehicles during that month. He also indicated, year-to-date through the end of June, the Ford Store is recognized as the seventh largest dealership in Northern California because of its large inventory. Feldman said the dealership sells about 180 to 200 vehicles on average, at an average cost of $30,000 each.
Though the dealership originally caused some protest before opening in December of 2004 near the East Dunne 101 on ramps, Feldman said the outcry has silenced.
“The community has been unbelievably supportive,” Feldman said. “We understand their initial concern. But people who have come in here are pleased with what they see and seem proud to have a local Ford dealership. People have commented they like our facility a lot, it’s a brand new facility, which is state of the art.”
The new Home Depot has also been touted as a large collector of local sales tax for the city.
“Our sales are definitely escalating,” said Chad Pagaling, assistant store manager at Home Depot. “We met our sales goal for the first year and actually exceeded it by $10,000.”
City staff said state law prevented them from disclosing how much sales tax revenue was generated by local businesses.
Dilles provided a 12-month total of sales tax collected from the second quarter of 2004 through the first quarter of 2005, which totaled $5.3 million – an increase of 24.2 percent. During that time period, the transportation sales tax revenue, which includes auto parts sales, repair and services, as well as gas and auto sales, increased by 35.4 percent to $1.62 million. Construction revenues showed the greatest increase of 95.2 percent to $658,405. Food products increased 9.1 percent to $717,457. General retail sales tax declined 2.6 percent to $929,616.
