Holiday shopping numbers show Lawrence did better than most but still lagging expectations; heading off an American Eagle Outfitters rumor
This is the time of year where you are thinking about Valentine’s Day shopping. (Don’t mind that sudden noise. It is just the sound of 20,000 male cellphones trying to call a flower shop all at once.) But at Lawrence City Hall, they’re still thinking about the Christmas shopping season. New sales tax numbers are in that show Lawrence shoppers were merrier than most but still may not have been merry enough.
State revenue officials have sent January sales tax checks to cities across the state. Those checks are for sales taxes that actually were collected mostly in November — or in other words, the start of the holiday shopping season. (And yes, it was allowable to start early for Valentine’s Day too, although it will be great fun perusing the candy aisle of your favorite convenience store on Sunday.)
The sales tax numbers from the state show that sales tax collections were up 0.8 percent in Lawrence during that early holiday shopping season. The good news is that those numbers are better than those posted by many of the state’s other retail centers. The concerning news, though, is the city is betting on sales tax growth far greater than 0.8 percent for 2016. To meet its budget, the city needs to see sales tax growth closer to 5 percent.
Here’s a look at some of the numbers and how Lawrence stacks up to other area communities:
— Lawrence: up 0.8 percent
— Kansas City: down 1 percent
— Sedgwick County: down 0.8 percent
— Johnson County: up 0.9 percent
— Salina: down 4.8 percent
— Manhattan: down 3.8 percent
— Lenexa: down 4.3 percent
— Topeka: down 0.7 percent
— Overland Park: up 1.3 percent
— Olathe: up 0.2 percent
— City of Shawnee: up 23.5 percent
With the exception of Shawnee — where consumers there must shop ahead for both Valentine’s Day and Presidents Day — Lawrence’s numbers stack up well.(UPDATE: I've figured out the Shawnee numbers. The state's report was incorrect in one regard. It did not note that Shawnee's sales tax rate increased as part of street improvement program. So, sales taxes collections have increased, but that's primarily because the rate has increased. The Journal-World's sister publication, The Shawnee Dispatch, had an article on that recently.)
But as I noted earlier, Lawrence will need to see better months than this one, if it hopes to meet its aggressive sales tax projections for 2016. City officials are projecting a 5 percent sales tax growth. The city finished 2015 with a 4.7 percent sales tax growth. The city more typically has counted on 3 percent sales tax growth to make its budgets.
But as city officials have previously noted, 2016 will be the first full year of sales tax collections with both Dick’s Sporting Goods and Menards in town. There is a hope that the addition of those two big box retailers will keep some retail dollars in town that otherwise have been leaving the community. That seems to be a good bet, but what is less certain is whether the overall economy will hold up and put shoppers in a spending mood.
Traditionally, a drop in gasoline prices has been a good thing for Lawrence retailers. It is tough to say whether that will be the case this year.
In other news and notes from around town:
• Part of my exciting lifestyle involves watching the Douglas County land transfers that show which pieces of property have recently changed hands. I know some of you also watch those because we’ve found ourselves in the same lonely corner at cocktail parties. The most recent listing from the county courthouse may have an entry that catches your eye: A group called American Eagle Properties Inc. has bought land in the Bauer Farm shopping center development near Sixth and Wakarusa.
There’s of course a national retail chain called American Eagle Outfitters, but as I told my wife when she was warming up the forklift to make more room in the closet, I don’t think this deal is a sign that American Eagle Outfitters is coming to town.
Instead, I did a little bit of searching, and found that American Eagle Properties appears to be more of a run-of-the-mill land holding company owned by a Colorado investor. According to media reports, it looks like the operator of American Eagle Properties used to own a Colorado-based beer distributorship that had American Eagle in its name.
As for what may go on the vacant property, I haven’t heard of any plans yet. It may be that the property just changed hands for investment purposes, but I’ll keep my eyes open for signs of any new projects.
If you have driven by the Bauer Farm property lately, you probably noticed there is a large amount of dirt work underway near the corner of Sixth and Folks Road. As we’ve previously reported, an apartment complex is going in near that location. I also have word that a credit union is building near the corner as well. I’m still gathering some information about that project, and I also hope to soon have a rendering to share of what the new apartment complex will look like.
Commissioners faced with big questions, high stakes as they prepare to decide fate of south Iowa shopping center
When Lawrence city commissioners meet on Tuesday, the shopping fanatics among us are going to be asking questions of whether Lawrence soon will get an Academy Sports, an Old Navy and a host of other big retailers that appear ready to move into a new shopping center proposed for south of the SLT and Iowa Street interchange. But commissioners will be facing larger questions than those.
Commissioners are set to decide the zoning issues related to the proposed KTen Crossing project, a 250,000 square-foot retail center slated for the southeast corner of the SLT and Iowa Street interchange. I don’t want to be overly dramatic here, but whether the commission decides to kill this project or let it proceed does come with some fairly high stakes.
Last month I wrote about some new numbers that create some questions about downtown Lawrence and its future as a major retail center. Commissioners will have to keep that issue in mind. But there are plenty of other numbers out there that create questions too. It will be interesting to see if the commission views this proposed project mainly on its own, or whether it tries to answer some bigger picture questions along the way.
What are some of those bigger questions? Well, here’s a look:
• Why are Lawrence shoppers spending less now than they used to? The city’s most recent retail market study provided a lot of statistics on sales tax collections. One part of the study looked at sales tax collections adjusted for inflation. In 2014, the city’s 1 percent sales tax collected $14.4 million. When adjusted for inflation, the city in 2004 collected $14.3 million. In other words, when you take inflation out of the equation, Lawrence’s retail sales from 2004 to 2014 grew by a meager 0.6 percent.
To compound the issue, that is despite the fact that Lawrence had population growth during that time period. According to the city’s figures, there were about 9,100 additional people living in Lawrence in 2014 than in 2004, and yet, true retail sales growth was basically flat. The city’s per capita sales collections fell from $164 in 2004 to $149 in 2014.
One obvious answer could be that the Great Recession did take place during this decade in question. People did clamp down on their spending. Maybe this drop-off is similar to what every other city experienced. The city’s retail market report doesn’t provide information on whether other cities had such a drop-off.
But there are other numbers that create concern that more may be at play here than the recession. The further you look back at the numbers, the worse the picture looks. From 2000 to 2008 — a period where the economy was humming — per capita sales tax collections dropped from $178 in 2000 to $156 in 2008.
Another answer may be that Lawrence residents are just making less money, so they are spending less money. That, however, is not what’s the city’s numbers show. The retail market study lists per capita income numbers that also have been adjusted for inflation. The most recent data is for 2013. It shows income levels from 2003 to 2013 grew by 5.8 percent, after inflation. It is certainly debatable whether that is a healthy amount of income growth — it is about a half-percent a year, after inflation — but it is accurate to say that Lawrence residents had more money in their pockets.
Of course, a third answer is that more Lawrence residents are shopping out of town as the number of retail shopping outlets in the Kansas City and Topeka markets have grown at a faster pace than the number of shopping options in Lawrence. Obviously, that is the answer the development group for KTen Crossing wants the city to land on.
Just to be clear, I don’t know the answer to the question, but it sure seems like an important one for the City Commission to figure out.
• How big of a player does Lawrence want to be in the retail world? The state produces a statistic called a trade pull factor for every major city in the state. It is basically a way of comparing a community’s per capita sales tax collections with the statewide per capita sales tax collections. It is not a perfect statistic, but it is a quick way to see if you are keeping up with the Joneses.
The most recent pull factor for Lawrence shows we’re at 1.04, which means our per capita sales tax collections are 4 percent better than the statewide average. Should commissioners be happy with being 4 percent better than average? That’s clearly a judgment call.
Lawrence is the largest city in the fifth largest county in the state. Lawrence, however, is not near the top five when it comes to pull factor rankings. Of the 25 first class cities in the state — a term used to describe some of the larger cities in the state — Lawrence ranks No. 16. Lenexa leads the pack. It is 55 percent above average. Some others of note: Overland Park is 43 percent above average; Topeka 32 percent above average; Manhattan 29 percent above average; Olathe 16 percent above average; and Wichita 12 percent above average. The two cities closest to Lawrence are Emporia at 8 percent above average and Coffeyville at 2 percent above average.
This is a one-year snapshot, which is not ideal. But, I have watched these numbers over the years, and Lawrence has always struggled to rank very high on the list. Some would say there is a reason that has been the case: our geography. Lawrence struggles to rise on the list because the draw of Kansas City and Topeka shopping is always going to depress the amount of shopping that occurs in Lawrence.
At some point, city leaders need to determine how much they buy into that argument. How far above average can Lawrence be? How much can we convince Lawrence shoppers to shop locally? Developers of the proposed shopping center are arguing this development will help keep shoppers in Lawrence, and may bring in some new shoppers from outside the city, most notably from Franklin County to the south.
Again, I don’t have the answer, but it appears Lawrence needs to figure out how much it wants to compete for the retail dollars in the region.
• How do we want to tax ourselves? Cities usually get most of their money to pay for basic services through sales taxes and property taxes. Communities that rely heavily on sales taxes feel one way. Communities that rely heavily on property taxes feel a different way. Usually, communities have a strategy for what type of mix they want to have when it comes to sales and property taxes.
My perception of Lawrence city government over the last 20 years is that there had been a desire to make sales taxes a greater part of the mix in order to provide some property tax relief.
There is some evidence that was the case at one point. In 1995, the total number of dollars in the city’s general fund budget that came from sales tax collections were 38 percent. That percentage steadily grew over the years. I think the high point came around 2002 — I might be off a year or two — when 47 percent of budgeted general fund revenues came from sales tax dollars. By 2005, that number dropped to 44 percent. In the 2015 budget, it has dropped to 40 percent.
Again, I don’t know what the “right” number is for Lawrence. But I think it is important to note that our revenue strategy in the city is changing. Has it been intentional? What are the consequences of it? For instance, has our changing tax structure played a role in the affordable housing issue that community leaders are discussing? It seems that city commissioners need to figure out whether these numbers cause them any concern and, if so, whether they think increasing the supply of retail options in the city will help change those numbers? It is a big question, and a tough one.
The question that many folks are probably most interested in is whether this shopping center proposal can win three votes at the City Commission? It is uncertain. My view, for whatever that is worth is that Matthew Herbert is a strong yes and Leslie Soden is a likely no, based on comments both of them made during the campaign earlier this year.
I chatted earlier this week with Commissioner Stuart Boley. He told me he’s open to the proposal, which I think means he hasn’t made up his mind yet. He did note that he’s uncertain how much this development will end up costing the city. The development is not asking for financial incentives like tax increment financing or special taxing districts. But Boley mentioned items like the cost to extend water and sewer service to the site and road improvements.
I had City Hall reporter Nikki Wentling ask the development group about that issue while she was covering yesterday’s informational meeting about the project. The group told her that it plans to pay “its fair share” for those infrastructure costs. Often, development groups form a benefit district, where all property owners in the district that will benefit from the extension of utility services will pay a portion of the costs. The city sometimes pays a portion too, but not always.
But it is worth noting that the city has already annexed the property, which means it is in a poor position to argue that it is too costly to extend basic utility services to the site. If the city felt that way, the normal course would be to not annex the property.
Then there is Mayor Mike Amyx. I think he is struggling with an issue that several people are. Based on conversations I’ve had with him, I think he doesn’t want Lawrence to become too out of balance geographically in its retail offerings. If this project proceeds, how much more difficult will it become for a retail area to develop around the Rock Chalk Park property in northwest Lawrence? That is a question that people are struggling with. But on the flip side of that coin, people also are struggling with the fact that the property around Rock Chalk Park has been available for retail development for a number of years now, and the retailers just have not come to the table.
Amyx told me earlier this week that if his crystal ball was working better that this would be a much easier decision.
Lawrence sales tax collections are a bit like the Kansas City Royals these days: They’re still in good shape, but concern is starting to grow that I shouldn’t have ordered 150 pounds of bean dip for the World Series party. In other words, both are in a bit of a slump.
The latest report from the Kansas Department of Revenue shows that Lawrence’s sales tax collections for the year are still 4.2 percent above last year’s collections at this point in time. But the report shows that most of that growth came early in the year, and now sales tax collections are coming in slightly behind last year’s total. For the August reporting period, the city’s sales tax collections were down 1 percent.
A slight drop in sales tax revenue for a single month isn’t that concerning. But what is more noteworthy is that city officials are continuing to express some concern that the 2015 sales tax total may fall short of budget. The city staff had been projecting that sales tax revenues would grow by 5 percent over 2014 totals. Staff members are now not confident such growth will occur.
“Our 5 percent revised budget doesn’t appear as conservative as we once thought,” staff of the city’s finance department wrote in a memo to the city manager’s office. “Staff will continue to monitor sales and recommend adjustments to the budget if it appears projections through 2015 continue to drop below the the 5 percent revised budget amount for the year.”
As we previously have reported, the city may find itself making some spending adjustments in 2015, in part because it wants to enter 2016 with a certain amount of cash reserves. If sales tax grows less than expected in 2015, that means sales tax collection in 2016 will have to grow more than expected in order to meet their budgeted amount.
We’ll see how the rest of the year goes. This most recent report was for the August period, but because of a lag in the sales tax reporting process, the report reflects purchases that were made in the mid-May to mid-June time period. Lawrence traditionally sees a spike in sales tax collections when students and their families prepare to return back to school. When the state issues its next couple of reports, we’ll know how big of a bump the city got this year from back-to-school activity.
As for how Lawrence compares to other large retail communities, it is a bit of a mixed bag. The latest report shows that Lawrence is lagging while several other communities are picking up steam. Of the eight major retail markets we track, only Sedgwick County posted a decline of more than 1 percent (down 1.7 percent) for the August period. Johnson County, on the other hand, posted a 1.4 percent gain in August, and Topeka was up 0.5 percent. Manhattan was up 1.1 percent and Salina up 1.9 percent.
But when you look at the year-to-date numbers, Lawrence is still doing well, thanks in part to a very hot start at the beginning of the year. Here’s a look at how Lawrence’s year-to-date growth rate of 4.2 percent stacks up to several of the other large retail centers in the state:
— Johnson County: up 1.3 percent
— Kansas City: up 3.9 percent
— Lenexa: up 4.1 percent
— Manhattan: up 2.4 percent
— Overland Park: down 1.9 percent
— Salina: up 3 percent
— Sedgwick County: up 1.7 percent
— Topeka: up 0.8 percent
On that list, Lawrence is still having the best year of any of the other retail areas.
So, maybe the bean dip order will be all right after all. But I’ve become convinced that I definitely should not have practiced the championship celebration in the living room — at least not with Gatorade that didn’t match the carpet.
You’ll have to decide whether you are in a glass-half-full or a glass-half-empty mood today. A new report from Lawrence City Hall on the city’s retail marketplace could leave you feeling either way.
First, the good news: Retail sales are still tracking above 2012 totals. Retail sales tax collections are up nearly 1.7 percent compared to the same time last year.
This month’s report tracks sales made through mid-May. Through that time period, taxable sales in the city have totaled about $677 million, up from about $666 million during the same time in 2012.
That’s good news, especially given that 2012 was a stellar year. Retail sales totals in 2012 grew by more than 5 percent, which was the largest percentage gain since 1998. So, the fact that retail sales are going above and beyond those totals is significant.
As for the glass-half-empty part, the report does have some numbers that likely will catch the eyes of City Hall budget makers. Sales tax collections for the latest collection period, mid-April to mid-May, were down by about 2 percent. A one-month decline isn’t cause for much concern, but this is the second month in a row that retail sales have declined. That makes next month’s report one to watch because three consecutive months of declines could be considered a trend.
The larger issue, though, is the city is now at the halfway point for its sales tax collections in 2013. (In case you are wondering, the city receives a check from the state once per month, and it recently received its June check. Because of lag time in collections, the June check only represents sales made through late May. Now you can amaze your friends at parties this weekend with the inner workings of the state’s sales tax collection system.) At the halfway point, sales tax collections are running below the city’s budget projections.
Thus far, collections are only down by about 0.2 percent compared to the budget. One good month will wipe out that shortfall. But the question, of course, is whether something has changed in the economy that will cause good months to be fewer and farther in between. The city is now projecting one scenario where sales tax collections would come in about 1 percent under budget, which would create about a $260,000 shortfall in the city’s budget.
It also would get the city’s 2014 budget started off on a bad foot. City Manager David Corliss’ 2014 recommended budget, which was released yesterday, projects sales tax revenues to grow by 2 percent over the amount the city budgeted to collect in 2013. So, if the 2013 collections come in less than budgeted, then sales tax collections in 2014 will have to grow by even more than 2 percent to meet budget.
None of this is new. Projecting sales tax collections is always a difficult part of the budget process. And if it makes you feel any better, cities all over the state are struggling with the issue too. Retail sales numbers are all over the board. Here’s a look at some of the larger retail markets in the state:
• Emporia: up 2 percent
• Hays: Down 3.1 percent
• Kansas City: Up 5.2 percent
• Manhattan: Down 3 percent
• Ottawa: Up 5.1 percent
• Overland Park: Up 2.2 percent
• Olathe: Up 2 percent
• Shawnee: Up 4 percent
• Topeka: no change from the prior year
So, what does all this mean? Is the glass half full or half empty? I don’t know. But, of course, I have a certain policy about glasses, a certain beverage and this heat. I take no chances. I keep a glass in each hand — one half full and the other half empty.
In case you had forgotten, today — April 15 — is tax day. But I hear that a high-ranking federal official will be in town on Friday, so perhaps you could save yourself some postage and just ask him to take it back to D.C. with him.
Let me know how that goes.
In the meantime, let’s talk taxes of a different type. The city of Lawrence now has received sales tax revenue through the first quarter of 2013, and the city’s retail sales totals are showing growth over and above what was a robust 2012.
Through the March report, the city has tallied $354.1 million in retail sales, up 2.1 percent from the same period a year ago. In case you are scoring along at home, these totals don’t represent sales actually made from January through March. The state’s reporting system has a lag, so these totals represent sales made in late 2012 up to about mid-February.
If you are looking for a reason to be negative ( and why wouldn’t you, it is tax day), the city’s March numbers are down about 1.2 percent from March 2012 numbers. But worrying about one month’s worth of sales tax numbers would be like me worrying about my wife buying $150 worth of leftover Easter candy. It's just something that happens in life.
If you are really looking for a reason to be negative (geez, how much do you owe the federal government?), you also could point to the fact that the city’s sales tax collections are growing more slowly than they did a year ago. But that may just be you being a grump because the city posted a blistering growth rate of 5.24 percent in 2012, which was the city’s best retail growth since 1998. Over the past five years, the average growth rate of retail sales in Lawrence has checked in at 1.8 percent. So, the first quarter was about average.
Compared to other places in the state, Lawrence’s performance in the first quarter was mixed. Statewide, retail sales grew by 3.7 percent. Here’s a look at some of the larger retail markets in the state:
• Overland Park: up 1.2 percent
• Olathe: up 4.9 percent
• Kansas City: up. 6.3 percent
• Topeka: up 1.3 percent
• Emporia: up 3.5 percent
• Salina: up 1.7 percent
• Hays: up 5.0 percent
• Manhattan: down 4.0 percent
(Look what happens when your football team goes to a bowl game. Everybody leaves town and spends their money somewhere else. I knew KU football knew what it was doing all along.)
A little closer to home, here’s a look at totals for some smaller communities around Lawrence. But take these figures with a grain of salt. The totals are often so small that it takes only a few dollars to produce a sizable change.
• Baldwin City: up 5.5 percent
• De Soto: down 5.9 percent
• Ottawa: up 7.7 percent
• Tonganoxie: up 8.1 percent
• Eudora: up 16 percent. I actually did the math on that one, and the increase represented an extra $1 million in retail spending during the first quarter. Eudora has been running an aggressive “buy local” campaign, with signs everywhere in town. So maybe that it is it, or perhaps my wife simply found a leftover Easter egg candy outlet in Eudora.
And finally, it wouldn’t be a sales tax article unless I got out my inflation calculator. (You should see the size of that thing.) Here’s a look at Lawrence’s retail sales totals since 2008 — just prior to the financial crisis. The numbers in parentheses are the total adjusted for inflation, in order to give you an idea of how much retail sales have grown above and beyond inflation.
• 2013: $354.1 million
• 2012: $346.6 million ($350.4 million)
• 2011: $333.2 million ($343.9 million)
• 2010: $309.1 million ($329.1 million)
• 2009: $327.9 million ($354.8 million)
• 2008: $334.7 million ($360.9 million)
So, we haven’t quite rebounded back to the levels seen prior to the financial crisis, but we’re very close. And we clearly have bounced backed from the lows of 2010.
If you want more analysis than that, you are going to have to do it on your own. I’ve got breakfast to eat — Cadbury eggs and chocolate bunnies, of course.