Cities’ sales tax revenue better than thought

MOSES LAKE — While the U.S. may have plunged into a recession in June as a result of the COVID-19 closures imposed in most states in March, a few governments in Grant County are doing better than they expected when the pandemic closures first hit.

“March sales taxes dropped, but April was to where it had been, which is really surprising,” said Moses Lake Finance Director Cindy Jensen.

According to Jensen, the city received $591,000 in sales tax revenue in April 2020, a nearly 4 percent rise from April 2019. Moses Lake March 2020 sales tax receipts of $451,000 were down 13 percent from the same month in 2019, though even with the closure of all “non-essential” businesses, the tax take was better than March receipts for three of the last five years.

Jensen said she believed much of the sales tax revenue was generated by online purchases as well as significant spending in home improvement centers.

“I expected a bigger drop because people were not working,” Jensen said. “I’m not sure how sustainable that is.”

The Washington state sales tax is 6.5 cents for every dollar, and sales taxes made up more than half of state revenue in 2018, according to the Washington Department of Revenue. Moses Lake collects an additional 1.9 percent to fund local and county government.

Moses Lake expected to collect $6.5 million in sales taxes in 2019 to help fund its $28 million general operating budget. Instead it collected around $7.2 million, Jensen said.

Jensen said the city has gotten by so far without having to lay anyone off, though city officials are delaying certain capital projects, especially the purchase of new vehicles.

The situation is similar in Ephrata, according to City Administrator Mike Warren, who said that revenue for the first few months of the year is “right on target” to meet the city’s $4.4 million general operating budget.

“Sales taxes are doing better than we thought,” Warren said.

Warren said the city is saving around $150,000 by not opening its Splash Zone water park this year, and a similar amount by not having a police chief on staff.

“We don’t have a lot of money to spend on other things, but we’re not laying anyone off,” he said. “We started to hire another public works staffer, but we’re not hiring that person.”

As in Moses Lake, Warren said Ephrata’s three major utilities — water, sewer and garbage collection — are funded by fees charged to customers, and so far they have been largely unaffected by the novel coronavirus pandemic.

Jensen said that the Surf ‘n Slide municipal water park in Moses Lake is a little bit different from aquatic parks in cities like Quincy and Ephrata, which actually cost their city governments money. In Moses Lake, the entrance fees for Surf ‘n Slide cover the entire $1 million cost of operating the park and actually make the city a little money.

“Most municipal pools are holes into the ground into which you pour money,” Jensen said. “Surf ‘n Slide actually breaks even and helps pay for other programs.”

The city of Moses Lake has not formally announced whether it will open Surf ‘n Slide this summer.

The one place both cities have seen a significant decline in revenue has been in the city share of motor fuel tax, which has declined by about 25 percent in Moses Lake and over 30 percent in Ephrata since the pandemic closures, both Jensen and Warren said.

That means less money for road repairs later this year, Jensen said.

While things are looking good now, the rise in COVID-19 cases in Grant County means the situation is still uncertain, especially for people who lose their jobs and small businesses “that might throw in the towel,” Jensen said.

“For most cities, the question is how long is this going to last? Compared with the last recession, it feels like it was just a hiccup, but we don’t know,” Jensen said.