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Will sales tax numbers get scary?


Perhaps the scare will begin in City Hall at about Halloween. For most of the year, city leaders have been bracing for sales tax numbers that look a bit spooky. But thus far - through nine months of the year - they've been one of the more pleasant surprises found in City Hall. The [ recently released September sales tax numbers][1] continued to exceed expectations. In September the city received $1.7 million in sales tax payments compared to $1.5 million in September 2007. Through the first nine months of the year, the city has received $15.88 million in sales tax payments compared to $15.06 million during the same time period of 2007. That's a growth rate of 5.4 percent, which is well above the 3.5 percent growth rate the city had planned for. If sales taxes continue to grow at their current pace, the city will receive about $1.1 million more than it did last year. More importantly, it would represent about a $500,000 windfall to the budget. Or another way to look at it - about half of what the city needs to cover increased operating expenses for the public transit system in 2009.But those chickens are still far from hatching. City Manager David Corliss has said the recent financial crisis on Wall Street has him worried that consumers will clamp down on spending in the fourth quarter of the year. [Plenty of others agree.][2] If so, that means sales tax numbers won't look so bright by the end of the year.The bigger question for the city may be how long the slowdown lasts. After all, the city is counting on some sales tax growth to make its plans for public transit and infrastructure funding work. City leaders are estimating that sales tax collections will grow at about 2 percent a year in the future. Usually that is a safe bet in Lawrence, but not always. In 2007, sales tax collections grew only by 0.9 percent. In 2001 - the last time the economy suffered a major shock - collections actually declined. What will happen this time? Beats me, but city leaders should have a better idea near Halloween. That's when the city should receive its next sales tax payment from the state, and that payment largely will reflect sales made in September when the financial crisis began to dominate the news. Kind of brings a whole new meaning to trick or treat. [1]: http://www.lawrenceks.org/web_based_agendas/2008/10-07-08/10-07-08h/cm_report_sales_tax_distribution.html [2]: http://www.nytimes.com/2008/10/06/business/06econ.html?_r=1&em&oref=slogin


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