Regional sales tax revenue deflates

A few hours after Gov. Timothy M. Kaine this week announced layoffs and other measures to address the state’s $1.35 billion revenue shortfall, the state released data on July sales tax revenue going to localities.

Lynchburg-area localities are receiving just less than $2 million in sales tax revenue for July, a 17 percent drop from the $2.4 million the region received in July 2008.

The revenue decrease was not a surprise, and in some cases was not as bad as had been expected.

“The new way to talk about economic good news is to say it’s not as bad as we thought it was going to be,” said Kimball Payne, Lynchburg’s city manager.

The numbers show Amherst County had the largest decrease at 58 percent, although county officials said that resulted from an anomaly.

In July 2008, the state collected a large sales tax payment from a county business that had not paid sales tax for some time, said Brenda Campbell, accounting director. That makes the drop in sales tax revenue seem larger than it actually is.

“Our sales tax may be down, but it isn’t down 58 percent,” she said.

Payne said that Lynchburg’s budget estimated that July’s sales tax income would fall 12 percent. Instead, it only fell 7 percent.

“It’s well within budget; It’s better than budget,” he said.

Although he did not have exact numbers on Wednesday for lodging and meals tax revenues, Payne said he believes those collections were on budget in July.

Payne said the city is still trying to understand exactly how Kaine’s budget cuts will affect Lynchburg’s bottom line and services. The cuts will affect the state’s aid to law enforcement, local libraries and to litter grants, he said.

He said the city has set aside $500,000 in anticipation of more state budget cuts and that should offset the effects in Lynchburg. He is not ready to say that the unexpected July sales tax revenue could help, as well, because it might only offset shortfalls in other areas or in future months.

“One month does not a trend make,” he said.

Campbell County was the only locality in the region to see its July sales tax revenue increase. It rose 11 percent from July 2008.

County Administrator David Laurrell said the additional revenue could result from a reporting anomaly. It could mean that sales tax from some stores was accidentally sent to Lynchburg, and that the money is being transferred to Campbell County now.

He said that the county benefits from most of its taxable sales coming from “the staples of life” such as food. Therefore, the county’s sales do not drop as much when people cut back on restaurant spending or high-end retail, he said.

Laurrell is concerned about Kaine’s announcement of budget cuts and the impact they have on localities. He said that leaving K-12 education largely untouched now could make things worse when stimulus money is no longer available for the schools. Also, he wonders whether localities need to brace for another round of state budget cuts later in the fiscal year.

 
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