Retail Sales Improving?

With sales tax revenue down approximately 12% in the Capital Area’s two largest cities, Austin and Round Rock, some may wonder how the smaller cities are faring. The short answer: a few cities are actually showing an increase in sales revenue, while others are slightly down when compared to the same time last year. The graph below represents the net change in sales tax payments from January 2009 to May 2009, compared to the same time last year for each city in the Capital Area with a population of more than 5,000 residents.

Note: Because of a lag in the data, this information may not correspond exactly to the time when actual sales occurred.

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Several cities posted double-digit increases in sales tax revenue, including Lakeway, Pflugerville, and Kyle, which likely benefited from new retail establishments and population growth. However, midsized cities of 20,000 to 99,999 were, on average, 2.4% off pace from last year’s sales revenue, while small cities, those with population of 5,000 to 19,999, were down 3.6% (not adjusted for inflation).

Tracking sales tax data is important as it represents a critical component of a local government’s budget, including a portion of the city’s general fund, and sometimes other programs like economic development, street maintenance and repair, and to pay for debt service on special community venues. In addition, other entities, such as Special Purpose Districts, Transit Agencies, and the State of Texas, also rely on this revenue stream for their operations.

Sales data is also an indicator of economic vitality. There is some evidence to suggest that sales nationwide may be stabilizing as the consumer confidence index recently posted a slight increase in March and a significant increase in April, meaning many retailers may see better days ahead. And workers will get a small boost this year and may decide to spend the extra $400.00 that most will receive from the “making work pay tax credit”, a part of the economic stimulus package.

The last piece of what I will call not great but better news is that with the May sales tax revenue, the net payments to Austin and Round Rock were still down, but not by as large of a margin as previous months this year: -9.5% in Austin and -4.0% in Round Rock for May. Both are still roughly 12% off last year’s figures.

Here's a table showing sales tax revenue for selected cities in the Capital Area, comparing January 2009-May 2009 to one year ago. More data can be found on the Texas Comptroller's website.

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Chris Ramser