With three-quarters of the year in the books, Lawrence sales tax collections on pace for nearly 10% growth

photo by: Mike Yoder

A shopper comes out of the Phoenix Gallery on Thursday, July 21, 2022, during the Downtown Lawrence Summer Sale.

I hear people complain that their stock portfolios are creating no growth. I don’t know what they’re talking about. My stock portfolio is growing my ulcer by the day. Given that, you would think news of a nearly 10% growth rate in a multimillion-dollar fund would be unequivocally good news. Yet, that is not entirely the case.

In the world of sales tax collections in 2022, a 10% growth rate isn’t what it used to be.

The City of Lawrence has now received nine of its 12 monthly sales tax checks from the state of Kansas. Thus far, the city’s sales tax collections are up 9.4% compared with a year ago.

That is both a historically high number and a below-average number.

In the past, a growth rate of 6% or 7% would be a great year for Lawrence sales tax collections. So, if Lawrence finishes the year at 9.4%, it would be extraordinary. But, it is also true that the number is currently below average. The average growth rate for local sales tax collections across the state is 11.5%.

The reason for the strangeness, of course, is the same reason that I make sure my checkout line in the grocery store is near a defibrillator: inflation.

As inflation has increased the price of most goods, sales tax collections have naturally gone up. Consumer demand has not increased by nearly 10% in Lawrence. I would guess 6% to 8% of that increase is due to inflation, meaning the rest is consumers actually increasing how much they purchase. Again, that’s a guess based on national inflation data. As you mull that over, it also is worth noting that even though these numbers are from the state’s September report, they really represent sales primarily made in July. That’s the lag time between when the sales are made and when the state compiles its report.

None of this is to say you should shed a tear for Lawrence and its nearly 10% growth rate. I definitely would trade the city my ulcer for its growth rate. I’m guessing most everyone would because Lawrence is still on track to collect $5 million more in sales taxes and use taxes — a special type of sales tax charged primarily to online sales — than it budgeted to collect this year.

The city budgeted to collect about $43 million in sales and use taxes in 2022. With three quarters of the year now in the books, the city has collected about $37.25 million of sales and use taxes. That puts the city about $5 million ahead of budget, roughly speaking. The last time I did this calculation was at the six-month mark, and the city was about $5.8 million ahead of schedule. So, it is worth noting that the second half of the year has been a little slower.

The fourth quarter of the year is a pretty big one for sales tax activity, so it will be interesting to see if the slowdown accelerates. If so, the city might be in the ulcer business. The city sure would like some of that unbudgeted sales tax revenue to help it close a budget deficit that it has been running recently.

For what it is worth, Douglas County government also ought to see a bit of a windfall in unbudgeted sales tax revenue. It has budgeted conservatively when it comes to sales tax growth rates, so it will collect more than planned. But, sales taxes are a much smaller part of the county’s overall budget than is the case with the city, so I haven’t taken the time to calculate the impact on the county.

In terms of how Lawrence’s sales tax collections are stacking up to other major retail markets in the state, here’s a look at year-to-date totals:

• Lenexa: up 20.4%

• Overland Park: up 15.7%

• Sedgwick County: up 12.9%

• Olathe: up 11.4%

• Shawnee: up 9.5%

• Lawrence: up 9.4%

• Kansas City: up 9.2%

• Salina: up 8.9%

• Manhattan: up 8.9%

• Topeka: up 6.8%

Since we are at the end of a quarter, let’s also look at how some smaller communities around us are faring year to date:

• Baldwin City: up 2.5%

• Basehor: up 4.2%

• Eudora: up 9.4%

• Leavenworth: up 2.6%

• Lecompton: up 9.5%

• Ottawa: up 10.3%

• Overbrook: up 16.5%

• Tonganoxie: up 15.7%

• Wellsville: up 7.8%


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