’08 sales tax collections are ‘cause for optimism’

Numbers seem to defy national gloom

Kansas University junior Zach Shoffner tests an electric guitar before a wall of musical merchandise Thursday at Mass. Street Music, 1347 Mass. Sales tax revenue for the city of Lawrence was up 3.8 percent for 2008.

Take comfort or solace in this thought: 2008 may end up being the good year.

Despite dark financial headlines for much of the year, Lawrence sales tax collections in 2008 grew at their most robust rate since 2004. The city collected $21.2 million in 2008, up 3.8 percent from the $20.4 million collected in 2007.

“These numbers are absolutely a cause for some optimism,” City Commissioner Rob Chestnut said. “It shows that we’re still a viable destination for many people.”

Since the beginning of 2008, City Hall leaders have been fretting over whether sales tax collections would take a downturn — first amid rising energy prices and a sputtering real estate market, and then amid the credit crisis that hit late in the year.

Some local retailers weren’t necessarily surprised by the results.

“I think they’re wanting to keep their purchases closer to home this year,” said Dan Hughes, owner of Sunflower Outdoor & Bike Shop in downtown. “They’re saying these businesses are important to them and to the community.”

But there is a caveat with the most recently released numbers. Weakness in collections did begin to show up in the fourth quarter of the year. For the final three months of 2008, sales tax collections were down by about 1 percent compared to 2007.

Plus, those numbers don’t show sales during the worst of the financial crisis. The government sales tax reports generally lag actual sales by about 30 to 60 days, meaning that sales from much of November and December have yet to show up in the totals at City Hall.

Both retailers and city leaders, though, were touting the latest numbers as good news, in part, because the numbers were better than the statewide average. According to data from the Kansas Department of Revenue, statewide sales tax collections for the first six months of the state’s fiscal year are up only about 1 percent.

Longtime retailer Joe Flannery, president of Weaver’s in downtown Lawrence, said he thinks the good results can be attributed to the stability the university provides the local economy.

Chestnut also thinks the university is playing a role by helping attract more visitors to the city.

“We’re having home football games where we’re putting 48,000 people in the stadium, and maybe a few years ago we didn’t have that,” Chestnut said. “I think as an entire community, we’ve started to create more events that draw people to town.”

In real numbers, sales tax collections came in about $132,000 higher than the city had budgeted for in 2008. That windfall will do a little to help ease revenue pressures in 2009. Chestnut said every little bit will help because he thinks sales tax collections will be under pressure in the near term.

“You have to figure the first half of 2009 won’t be that bright,” he said.