City’s sales tax revenue declines

An economic downturn appears to have quashed the sales tax windfalls local governments have collected the past two years.

Sales taxes received in February were down 5 percent from a year ago in the city of Spokane. Although collections were up for Spokane County and some smaller cities, they also were down in Spokane Valley and Liberty Lake.

For Spokane, it was the first decline in a monthly collection in three years.

“It certainly looks and feels like a recession to me,” said Spokane Chief Financial Officer Gavin Cooley.

Spokane projected a 3.5 percent increase in sales taxes for the year. Even if collections fall short of that target, the city should be able to avoid significant cuts. That’s because the City Council is expected to take $5 million from last year’s surplus to create a fund to use in economic hard times.

Final numbers aren’t yet in, but Cooley said the city likely ended 2007 with about $7 million more than expected, including $2.5 million from higher-than-expected sales tax revenue.

Still, the booming sales tax returns in the first part of 2007 slowed greatly in the second half, Cooley said.

“We’ve been on a pretty good run for quite some time,” he said.

Cooley said Spokane is poised to weather an economic downturn because leaders generally have avoided hiring many new employees.

But then-Mayor Dennis Hession last summer proposed hiring 24 police officers and six firefighters at the same time he was recommending an end to a temporary property tax increase.

The City Council approved the hiring of 12 police and the firefighters in the 2008 budget.

Hession’s plan called for adding the other 12 police in 2009. Some council members said this week that plan may need to be re-evaluated if the sales tax trend continues.

Mayor Mary Verner said she remains hopeful that all 24 police will be hired. Turning last year’s surplus into a stabilization fund should help, she said.

Spokane County CEO Marshall Farnell said it’s too early to judge the condition of the county budget, which included a projected 3 percent increase in sales tax collections. “I’m not in crisis mode yet,” he said.

The county was one of a few jurisdictions that experienced sales tax growth in February.

Spokane Valley only projected a 2 percent increase in sales tax revenue, a decision that leaders there say will help them avoid cuts.

“We’re pretty well set to weather any type of economic storm that might be on the horizon,” said Spokane Valley City Councilwoman Diana Wilhite.