MuskogeePhoenix.com, Muskogee, OK

March 4, 2014

Sales tax revenues continue to decline

City executives cut departmental spending in response

By D.E. Smoot
Phoenix Staff Writer

— Sales during the second half of the holiday season fell short of what was needed to reverse the slide of the city’s sales tax revenue into negative territory.

Data compiled by the Oklahoma Tax Commission show the city’s share of February sales tax disbursements totaled just more than $2.07 million. That is down $51,361, or 2.42 percent, from the more than $2.12 million reported for the same period a year ago.

February sales and use tax disbursements are based upon actual sales reported Dec. 16-30 and estimated sales for Jan. 1-15. Statewide, disbursements totaling more than $140.46 million were returned to 510 municipalities — that is up 3.47 percent, or $4.72 million from the nearly $135.75 million distributed a year ago.

City Manager Howard Brown Jr. said the decline of consumer spending in Muskogee continues to erode the city sales tax as a revenue source. He attributed lower sales tax revenue partly to the inflation rate, which has lagged behind the 2 percent rate that has been used historically to set budgetary benchmarks.

For fiscal year 2014, which began last July 1, the city of Muskogee has received nearly $15.66 million in sales tax revenue — year-to-year losses were recorded for all but two months of the first eight months. That is down 0.64 percent, or $101,420, from the $15.8 million collected during the same period during fiscal year 2013.

City administrators have been dealing with those lower numbers by reducing department-level expenditures. Another step that has been taken lets vacant positions go unfilled.

“Based on the savings we realized for having so many vacancies in the earlier part of the fiscal year, we realized substantial savings,” Brown said. The realized savings “were of an amount sufficient to overcome less-than-expected sales tax revenue.”

Even so, mid-year budget cuts may become necessary to address the extended decline in sales tax revenue for the remainder of the fiscal year. Brown said any adjustments would affect departmental spending, but he anticipates “services to Muskogee residents to remain at current levels.”

“But as for next year, those discussions will occur after department budgets are reviewed to determine where we are able to make those necessary cuts to make up for lost revenue,” Brown said. “The budget will reflect a very conservative estimate for sales tax projections for next year.”

In addition to declining sales tax revenue during the February reporting period, the city’s use tax collections fell 12.71 percent, or by $18,063, compared to year-ago totals. The OTC report shows Muskogee received $124,051 from taxes collected on purchases of out-of-state goods for in-state consumption or use, down from the $142,114 disbursed a year ago.

The lion’s share of the city’s share of use tax collections is dedicated to economic development. Beginning this fiscal year, up to $1.2 million of Muskogee’s use tax collections will be deposited into an economic development fund.

Reach D.E. Smoot at (918) 684-2901 or dsmoot@muskogeephoenix.com.