City’s sales tax report shows drop from pandemic; so far, Lawrence numbers are better than elsewhere

photo by: Mike Yoder

Lawrence City Hall, 6 E. Sixth St., is pictured Thursday, July 7, 2016

It could have been worse. It is a phrase I utter every time I leave a homemade haircut with both ears, and it also may echo in the city’s finance department after Lawrence leaders received their first sales tax check that has been slashed by the pandemic.

The city’s May sales tax collections were down 7.1% compared with the same period a year ago, which amounts to about a $150,000 hit to the city’s finances. For the year, Lawrence is now in negative territory compared with 2019, down about 0.5% or $56,000.

While May’s 7.1% decline is a big drop by historic standards, it is not apocalyptic, and Lawrence actually fared better than most other retail markets in the state.

But don’t start singing hallelujah quite yet. (We couldn’t understand you with the mask, anyway, which is another reason to be thankful for masks.) We are just at the beginning of this from a financial standpoint. The sales tax check the city received this week is its May check, but because of normal delays in reporting, the numbers actually represent sales made mostly in March. That means sales tax collections were down $150,000, even though the pandemic really didn’t hit until the latter half of the month.

But it could have been worse. Statewide, the average decline was 7.6% for the month. So, Lawrence was slightly better than most other communities. When you look at the state’s largest retail communities, Lawrence was significantly better. Only Lenexa posted better numbers than Lawrence, and that was because of a statistical anomaly related to last year’s returns. Here is a look at those numbers:

• Lenexa: up 45.9%

• Lawrence: down 7.1%

• Olathe: down 9.1%

• Sedgwick County: down 9.7%

• Shawnee: down 9.8%

• Salina: down 10%

• Topeka: down 10.7%

• Kansas City: down 12.1%

• Overland Park: down 14.9%

• Manhattan: down 15%

None of the numbers include any impact from increased online sales. Those are tracked through a different type of tax called a use tax. The state hadn’t yet released those numbers Tuesday morning. I’ll keep an eye out for those and report back, if significant.

On the sales tax front, Lawrence’s performance is a bit surprising in at least one regard. Douglas County has been posting the second highest unemployment rate of any urban county in the state, according to estimates put together by KU’s Institute for Policy & Social Research. As jobs dried up, you would think retail spending would be hit equally as hard. But that wasn’t the case here, and it wasn’t the case in Sedgwick County, which is home to Wichita and the state’s highest unemployment rate. While still bad, Sedgwick County’s sales tax collections were still better than many locations in Johnson County, which has an unemployment rate that is less than half of Sedgwick County’s.

The numbers in Manhattan also are interesting. As the state’s other large university community, it posted a decline perhaps a bit more in line with what you think would happen when students leave en masse. I don’t have an easy explanation for the difference. Manhattan has a lower unemployment rate than Lawrence does currently, yet its sales tax difference is significant. The first thought would be that Lawrence does pretty well in March because of the large amount of spending — parties, drinks, food — related to post-season basketball. But, if you recall, the pandemic canceled all of the postseason games for the Jayhawks. (Granted, I did go through about four cans of bean dip before I realized there wasn’t a game on, but I don’t think that explains this.)

Hopefully, Manhattan’s early results aren’t the canary in the coal mine for Lawrence. A 7% downturn already will create problems for Lawrence’s budget, but my high-level math tells me a 15% downturn would likely double them.

The latest numbers are interesting for one other set of communities: smaller towns. Several of the smaller communities around Lawrence showed a pretty good uptick in sales tax collections. I don’t know why, but here is one guess: Many of the towns are commuter towns. As people either were laid off or started working from home, they did more of their shopping in their home communities instead of their work communities. Here’s a look at some of those numbers:

• Baldwin City: up 14.9%

• Basehor: up 6.6%

• Bonner Springs: up 14.9%

• De Soto: up 30.3%

• Eudora: up 18.6%

• Lecompton: up 1.7%

• Ottawa: up 5.0%

• Overbrook: up 27.1%

• Pomona: up 22.5%

• Tonganoxie: down 4.6%

• Wellsville: down 15.8%

Everybody but Wellsville, in Franklin County, outperformed the statewide average. Those numbers provide another data point for one of the more interesting questions of this pandemic: Does it finally pay to be small?

It is too early to say on that. But one thing that does seem clear: For communities that are large, becoming small comes with the prospect of a lot of pain.

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