Sales tax receipts may exceed projections

City staff are confidant that the half cent sales tax, which began collection in July 2013, will garner significantly more in funds this year than expected.

Now that the first six months of the tax collection have been reported, the total funds in city accounts from the tax equal around $476,000, even though the city had to pay out a significant refund one month.

“It clearly shows that our optimism is founded,” said city manager Gary Person at Tuesday’s city council meeting.

To add to this, the city expects excellent revenue from the tax during the summer travel months remaining in this fiscal year. The city’s fiscal year begins in October.

“We conservatively told the public that we had hoped that this would generate an average of $1 million a year over 10 years,” Person said. “We may reach that threshold, we should reach that threshold, the first year that’s in effect.”

The higher than expected collections in the first year means there is a good chance the tax could average more than $1 million per year.

“If you forecasted a million dollars each year for the next ten years, that seems very conservative,” said councilman Chris Gay.

Person commented that if the city continues to attract projects like the Love’s travel stop, sales tax growth in the next decade could rise substantially each year.

“Anything that’s retail based is gonna generate more sales tax,” Person said. “Every time you create new housing, or bread winner type payrolls here those people are going to buy more.”

It could be possible for the city to see 10 percent sales tax growth per year, Person said, although it would be unwise to plan for that amount.

“I think 5 percent is very doable,” Person said.

Gay and Mayor Wendall Gaston agreed that the city should re-visit plans for the allocation of funds if money keeps coming in at higher rates.

“Ten percent a year, that’s a material difference in what we’re thinking about and what’s available to spend for these projects,” Gay said.

Any extra funds collected could help pay for work that is over budget on any planned projects, as well as additional projects that the city was unsure about funding.

“Plus it allows us to do some really inventive things in the park,” Gaston said.

Voters approved the half cent sales tax in fall 2012. All of the funds the city collects from the new tax are allocated to various projects, including 50 percent for street improvements, 30 percent for a new swimming pool, 12 percent to the irrigation system and other improvements at Hillside Golf Course, 5 percent to storm water mitigation projects and 3 percent to the parks department.

Although in the past the city’s budget planning process for sales tax funds was crippled by large refunds to local businesses without warning, new legislation which went into effect at the beginning of this year gives the city a one year advance notice of such refunds.