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City’s April sales tax revenues bring relief

Port Orchard saw higher than expected sales tax collection for the month of February, potentially sparing the city from cutting the 2012 budget.

The city collected $206,511.57 in sales tax revenue for February, which was disbursed in April and 13.1 percent higher than the originally estimated $179,468.11 to be collected.

The city’s treasurer, Alan Martin, announced the collection numbers to the city’s finance committee at a breakfast meeting on April 26. The higher than expected collection follows three months of lower than anticipated sales tax revenues during the winter.

The first three months of the year had the city’s sales tax collections down $27,485 from the projected figure. The April boost put the city essentially on course for sales tax collections.

Finance committee members were happy to hear the news.

“We are real close to being right on target,” said Councilmember John Clauson, the city’s finance committee chair.

The city expects to collect $2,800,000 in sales tax for 2012, with sales tax collection making up one-third of the city’s annual tax revenue collected.

Mike Gowrylow, a spokesman for the Department of Revenue, said sales taxes are distributed to the city two months after the taxes are collected at a cash register. When the city has higher than expected tax collection in April, it means the month of February had booming sales.

“There’s at least a two-month lag for sales,” he said. “For April, the city sees what was actually collected by DOR in February.”

The State’s DOR spokesman said he wasn’t sure why Port Orchard saw a significant boost in sales tax collections for April, or why sales tax collections were lower in January, February and March. Statewide, sales tax collections were up from 2011.

“It’s very volatile,” he said.

Martin said the city usually tracks closely with the state’s collection reports. If the state does well, it often means the city does well, too.

“A rising or falling tide carries all boats,” he said. “We track very close to state collection reports.”

The city’s sales tax rate is 8.4 percent. Gowrylow said minus the state’s portion, which is 6.5 percent, the city collects 1.9 percent. However, he said, not all of that money goes directly to the city. Around nine-tenths of 1 percent of the overall collection goes to shared city and county systems, such as transit and jails. The city keeps about a 1 percent sales tax at the end. That means out of every $100 of taxable goods or services sold in Port Orchard, the city sees about $1, he said.

Martin said in actuality the city collects about .84 percent, with the county and the DOR taking out a bit more at the end.

Finance committee members agreed that while the April tax collection numbers were encouraging, the city was not out of the financial woods, yet. The city remains $443.48 down against projections for the year, and another bad month could again bring budgetary stress.

“I like it,” Councilmember Jerry Childs said. “I will caution this is just one month.”

At the meeting, Martin used an analogy of a basketball game’s first quarter in which, after being down for most of the quarter, the city went on a run toward the end to bring sales tax collections close to what was projected. He said the year — or game — was far from over. But it’s nice to see the score essentially tied up.

 

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