At first glance, this month’s sales tax check from the state comptroller’s office is good news, a 19 percent year-to-year increase compared to August 2016.
Take a closer look at the numbers, Kilgore City Manager Josh Selleck says, and a hidden piece of bad news means the month is better than it first appears.
The City of Kilgore’s sales tax revenue allocation from the state is $731,745.06 for August 2017, but that number’s short almost $250,000.
“It was an audit adjustment down by $243,667,” Selleck said Friday. Such adjustments aren’t uncommon, adding revenues or subtracting as Texas Comptroller Glenn Hegar’s office rectifies old, incorrect figures. “Without the audit adjustment, this month’s return would have been $975,412, almost 60 percent more than the prior year,” $615,308.62 in the allocation check for August 2016.
Each month’s sales tax check is calculated from sales two months prior – August is based on sales in June by businesses that report tax monthly, the comptroller’s office notes, plus sales made in April, May and June by businesses that file quarterly.
In Kilgore, City Hall keeps two-thirds of the monthly allocation checks while the remainder benefits Kilgore Economic Development Corporation’s efforts.
As city manager, Selleck is permitted to review, but not share, data on various businesses. The information offers some additional insight on the local economy – improving, but only by degrees.
Wednesday’s sales tax report is still great news, he added.
“By no means do I want to take any of the wind out of that sail, but at the same time I want to be realistic about what this does and doesn’t mean,” Selleck said. “This does mean that we’re seeing some positive oil-and-gas activity. It does not mean that it’s spread across the whole local industry.
“As such we’re going to be cautious how we use those funds and how much we become dependent on them.”
Still waiting on recent data, the past five months reports indicate recovery, Selleck reported, for select businesses.
“I can tell you we have taxpayers who are seeing substantial but not necessarily sustainable increases to their monthly tax returns,” he noted. “The key here is that many of these appear to be one-time payments, some of them in the hundreds of thousands of dollars.
“As such, while we’re happy to see the numbers increased like this, we don’t have any confidence that these increases will be sustained over the long term.”
In the past, Selleck noted, the city’s top 10 business taxpayers accounted for more than 20 percent of the total sales tax returns.
“That now has shifted. Our top three taxpayers now account for nearly 30 percent of our sales tax returns.”
The good news, he noted, is the additional revenues (despite the audit adjustment) help bolster the city’s books for the year.
Not so good: City Hall can’t bank on the same good news every month. Revenues from Kilgore’s sales tax rollercoaster augment the dependable revenue streams that fund city services.
“Because we don’t depend on these (sales tax) revenues, these one-time revenues are ones that will bolster our reserves and ultimately should be used on one-time projects,” Selleck said. “Ultimately, that’s the council’s philosophy: we only want to be dependent on those sales tax revenues that are sustainable and dependable.”
That’s not to say city leaders won’t shift their sales tax projection higher, he added, but that step is further down the road as the city focuses on continuing to fund services amid a still-struggling economy.
“Even with this return” in August, Selleck said, “this still leaves us about $300,000 short of budget for Fiscal ‘17,” meaning the city will still utilize a large portion of its $750,000 contingency fund, putting off low-priority street projects until later.
As budget season continues, Selleck on Tuesday proposed a $5.1 million sales tax projection for Fiscal Year 2018, unchanged from FY17.