• 50°

Sales tax loss to remain unknown for months despite requirement to pass budgets by July

By Natalie Anderson
natalie.anderson@salisburypost.com

SALISBURY — Sales tax revenue comprises a significant portion of each county’s fiscal year budget, but the full impact of COVID-19 on sales tax revenues is still unknown.

And the months-long wait to receive the revenue can pose a challenge for counties, which are required to pass a balanced budget by July 1. County commissioners, meanwhile, must be presented with a balanced budget no later than June 1.

After March sales occur, retailers must remit taxes by April 20, according to the North Carolina Association of County Commissioners. Then, the North Carolina Department of Revenue calculates and prepares each county’s allocation in May before sending revenue on June 15. The three-month delay in receiving sales tax revenue, particularly during this time of uncertain projections, is leaving counties making the best guesses they can for their budgets.

It’ll take another month for the April revenue to reach counties, which economists anticipate included an even deeper economic decline.

Rowan County Manager Aaron Church said in a presentation to the Board of Commissioners on May 4 that the “projection is going to be a guess.” One of the first steps counties can take to help the financial blow is implement a hiring freeze of county employees, which commissioners approved at the May 4 meeting.

In last year’s county fiscal budget, the Rowan County commissioners adopted a budget of nearly $159.9 million, with $26.3 million of the revenue generated from sales tax. So, sales tax revenue comprised 16.5% of the county budget.

Last year, of the $3.5 billion in local sales tax revenue distributed to local governments, $2.3 billion was distributed to counties, according to the NCACC.

While sales tax revenue can take months to reach counties, occupancy tax rate estimates are available quicker, which can still serve as a “leading indicator” of what’s happening in the local economy since both occupancy and sales taxes move together, said Tourism Development Authority Director James Meacham.

Meacham said the hospitality, lodging and service sector contribute to about a third of the county’s overall economy.

He said revenue from March sales in the hospitality and service sector are down 33% compared to March 2019. And that includes 10-12 days of a strong economy before the state stay-at-home order was implemented. Additionally, he added that the March figures were originally on track to be 15% more than March 2019.

Meacham clarified figures include revenue from the occupancy tax and not retail sales.

He anticipates “much deeper decreases” in April.

Other economic projections estimate a bigger hit to April as well, since all of the month was under the stay-at-home restriction and mandatory business shutdowns. The N.C. Association of County Commissioners presents a scenario of a 40% decline in local sales tax revenue for April, which would total an almost $300 million loss statewide for all counties compared to 2019-2020 fiscal year. And with this same scenario, sales tax revenues statewide could potentially drop by 8-10% for fiscal year 2020-21 compared to the previous year.

Wells Fargo is projecting a decline of 8.7% in March sales, and other financial entities have projected similar numbers, according to the NCACC.

In Church’s presentation, which derived information from the NCACC, he stated that the impact on the county budget if the decrease is at 10% would result in a loss of $2.6 million to Rowan County. There would be a loss of $5.3 million if the decrease is at 20%.

The Rowan County Economic Development Commission sent out a survey in which a total of 121 businesses completed by the end of April, with 35 additional businesses partially completing it. Of the 121 businesses that completed the survey, 50 companies, 32.7%, reported they were closed.

All but one of the companies that closed reported doing so in mid-to-late March. Rowan EDC President Rod Crider noted that the increase of closures in a three-week span means COVID-19-associated shutdowns have hit businesses “really hard, really fast.”

Fortunately, Meacham said, “things have stabilized,” and he doesn’t foresee any further declines beyond April’s drop.

But others, including Crider and economist Dr. Michael Walden from N.C. State University, have said a big factor in economic recovery will depend on consumer and business confidence. Meacham anticipates a better sense of how the economy will recover and how confident consumers will feel in early to mid-July once stay-at-home restrictions are fully lifted.

Contact reporter Natalie Anderson at 704-797-4246.

Comments

News

‘People are the parade’: Salisbury’s annual Christmas parade reinvents itself in year of coronavirus

News

Commissioners grant permit, allow Reaper’s Realm to continue operations for remainder of Halloween season

Elections

Republican Rep. Budd maintains fundraising lead over Democratic challenger Huffman

Local

City council to consider ‘Share 2 Care’ fund for locals behind on water, sewer payments

Education

None speak against closure during hearing to shutter Faith Elementary

Crime

Blotter: Police find car windows shot out, bullet holes in home on West Horah Street

Crime

Five held at gunpoint in East Lafayette Street robbery

Ask Us

Ask Us: Readers ask questions about Shober Bridge, voting safeguards

Elections

Political notebook: More than 1.4 million votes cast already in North Carolina

Elections

‘Souls to the polls’: More than 1,300 cast ballots on first Sunday of early voting

Crime

Crime blotter: Salisbury man faces charges for firing shotgun in city limits, drug possession

Local

Search continues for missing hiker from Asheville

Local

A stroll through the scarecrows: fall-themed activity draws visitors to NC Transportation Museum

Elections

Despite scandal, Cunningham maintains small lead in Senate race; supporters say policy positions more important

Lifestyle

Rowan Helping Ministries golf tournament raises $20,000

Local

Town of Spencer forging ahead five years after drafting plans for Park Plaza

Business

Biz Roundup: RCCC to host conference on diversity, equity and inclusion

Business

Elderberry syrup: the popular purple product that has become a mainstay in local stores

Local

Trinity Oaks to host Halloween Spooktacular

Entertainment

Lee Street theatre improves virus prevention tactics, “determined” for ‘Fun Home’ to open

News

Deficient NC absentee ballots frozen pending further rulings

News

Cunningham outraises Tillis, enters October with less cash

News

Ex- GOP lawmaker charged with assaulting poll worker

Nation/World

Trump leans into fear tactics in bid to win Midwest states