photo by: Nick Krug

A cashier hands a receipt back to a customer after a purchase at Lawrence's Sunflower Outdoor and Bike Shop in this file photo from July 6, 2017.

Inflation may be producing one set of numbers in your household. (The number of times I’ll have steak this year: zero, unless putting A-1 sauce on a hot dog is good for partial credit.) But at Lawrence City Hall, inflation is producing a different set of numbers.

One number that may come to fruition by the end of the year: 6 million. That’s roughly the number of unexpected sales tax dollars Lawrence City Hall is on pace to collect in 2022, thanks largely to the price of so many goods and services increasing.

That $6 million figure is speculative. It could go up or down based on how the economy turns in the last six months of this year. But through half the year, that is about how much the city is scheduled to collect in sales tax revenues over and above what it budgeted to collect.

I’ll get into more details in a moment, but first let me pass along some harder numbers. The city recently received from the state its sixth of 12 sales tax checks for calendar year 2022. When you add up all the different types of sales taxes — the citywide sales tax, the city’s portion of the countywide sales tax, special use taxes on internet purchases, etc. — the city collected $24.4 million in the first six months of the year, according to figures from the Kansas Department of Revenue.

For the entire year, the city is budgeted to collect $43 million in sales taxes, according to city budget documents. Half of $43 million is $21.5 million. In other words, at the halfway point, the city is about $2.9 million ahead of pace. If the second half of the year plays out like the first half, the city’s sales tax collections would come in about $5.8 million over budget.

Of course, the second half of the year may not play out like the first half. High prices may finally cause some consumers to dramatically cut back on their spending. If so, sales tax collections wouldn’t grow as quickly. Or maybe inflation is tamed, (before you laugh, pigs can fly, if you have the right carry-on luggage) which also could lead to slower growth in sales tax collections.

Any number of things could happen the rest of this year, but I still think there is value in looking at where the city stands at the six-month mark. That’s because the city is set to begin its budget-making process for 2023 in the coming weeks. City commissioners and City Hall leaders will have to do some projecting of how 2022 is likely to end in order to make reasonable assumptions about what the city’s budget should be for the next year.

It is important to note, though, that this possible $6 million in unbudgeted sales tax collections only tells half the story. Inflation, just like it impacts your household costs, also has been increasing the cost of government services. The city uses a lot of gasoline and diesel, for example. City commissioners will be briefed on whether city expenses are coming in above budget as well. If so, some of that $6 million in unbudgeted sales tax dollars may be needed to pay for what the city already has committed to buy.

But, if the city thinks it is going to have a bit of a windfall in sales tax revenues — meaning sales tax dollars that it can actually put in a savings account for future use — it would be good to know that as city commissioners craft next year’s budget.

My general philosophy on city budgets — after having watched more than 20 of them be crafted — is that every dollar of sales taxes that you can accurately predict you’ll collect is one less dollar in property taxes you need to charge your residents in the next year. Yes, the city has other revenue sources that are important, but sales and property taxes are the two big ones for general government services.

If the city could accurately predict that it will have several million dollars in unbudgeted sales tax collections at the end of the year, that could help in building the 2023 budget. It theoretically could take some pressure off the city’s property tax rate. How? The city is going to have to project how much it will collect in sales taxes in 2023. Predicting the future is hard, so governments tend to be conservative in those projections. However, if you know you are going to end 2022 with — let’s just pick a number for the sake of this exercise — $4 million in unspent sales tax dollars, that might give you more confidence to be more aggressive in your sales tax estimate for 2023. If you miss a bit, you have that $4 million cushion to fall back on. In turn, if you can be more aggressive with your sales tax estimates, that should lessen the need for the city to collect as much in property taxes in order to cover its spending.

The city may need all the help it can get in predicting the trend for sales tax collections in 2023. Uncertainties about inflation will make such a prediction very difficult. Numbers from the first half of this year show why. Collections for Lawrence’s citywide sales tax are up 10.5% in the first six months of 2022 compared with the first six months of 2021.

Should the city assume that they’ll continue to increase at that rate in 2023? That would take a lot of gumption to make that assumption. Historically, a 5% increase in sales tax collections in a given year would be really strong. Expecting 10% would be really aggressive.

Those are the types of issues city commissioners will have to deal with this summer as they craft the budget. As we reported earlier, the stakes are high for residents because property taxes already are expected to go up significantly due to rising home values.

To wrap this up, here’s our monthly list of how Lawrence’s sales tax collections are growing compared with other major retail markets in the state:

• Lenexa: up 16.7%

• Overland Park: up 13.6%

• Sedgwick County: up 11.8%

• Olathe: up 11.4%

• Lawrence: up 10.5%

• Salina: up 8.9%

• Shawnee: up 7.7%

• Manhattan: up 7.4%

• Kansas City: up 7.3%

• Topeka: up 6.5%

Statewide, local sales tax collections have increased by 10.4% for the year, so Lawrence is almost exactly average in the category.