Sales Tax Revenues Plunge Across Texas

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    Sales tax collections plummeted across Texas in October, dimming hopes for a quick turnaround and raising fears that the downturn is far from over.

    Sales tax collections plummeted across Texas in October, dimming hopes for a quick turnaround and raising fears that the downturn is far from over.

    For months, most communities have seen declining sales tax revenue. But in many cities, the drop became a nose dive in October, according to new figures from the state comptroller's office.

    Collections in Plano were down nearly 20 percent in October from a year ago.

    "The economy has not come back like the TV reports said it would," Karen Rhodes-Whitley, Plano's budget director, joked grimly.

    October revenue was off 18 percent in Irving, 17 percent in Fort Worth and 11 percent in Garland. Dallas fared somewhat better, reporting a 5.3 percent decrease.

    The numbers, released this week, suggest that an economic recovery may yet be some distance away. The figures also raise the prospect that some cities may have to cut their budgets and staffs again, having done so just months ago.

    Sales and property taxes constitute the primary fuel for local budgets.

    "It's a real mixed picture," said Bernard Weinstein, an economist at Southern Methodist University. "Folks are increasing their savings and spending less."

    He and others said sales tax figures in the coming months would give a better indication of the economy's direction.

    The October news was worse in some communities beyond North Texas, particularly in places that rely heavily on retail or the energy industry.

    Revenue declined nearly a third in Midland, 22 percent in Round Rock and 17 percent in Houston. Beaumont was among Texas' hardest-hit cities, with collections dropping 36 percent. Statewide, revenues were down nearly 15 percent.

    Some economists had hoped that the October numbers might offer signs of a recovery. The thinking was that tax revenues this year would undoubtedly surpass those collected late last year. After all, it was in October 2008 when stocks declined, credit markets froze and the downturn gained steam. But the reality has proven to be different.

    Terry L. Clower, an economist at the University of North Texas, says the recession's impact is cumulative and slow to show up in numbers.
     
    "We all know people who have been out of work for substantial periods of time," he said. "But people don't change their spending habits overnight. This has been building for some time."

    Even such growing communities as Allen, Frisco and McKinney, which have weathered the economic storm relatively well, posted double-digit declines in October.

    Officials in Allen were surprised when they learned that revenue fell 12 percent. Two shopping centers, Watters Creek and the Village at Allen, have opened in the last year.

    "We knew that 2010 was going to be a difficult year," Allen City Manager Peter Vargas said. "People are being more selective in the amount of shopping they are doing. We're just going to have to adjust."

    Carrollton's sales tax collections fell 25 percent, although the drop may have been the result of a discrepancy, officials say. Carrollton's tax revenue in October 2008 was abnormally high.

    Plano's leaders expressed concern at the October slide. The city was once the undisputed retail giant among Dallas' northern suburbs. But neighboring cities have been chipping away at Plano's share of shoppers. Leaders fear the trend might be accelerating.

    "This has got to be the largest downturn in recent memory. This is concerning," said Brad Shanklin, president of Plano's Chamber of Commerce.

    Octavio Ortiz, general manager of The Shops at Willow Bend in Plano, said he thought that slow business activity, not sluggish retail, is to blame. About half of the city's sales tax revenue is from commercial sales.

    "We're very optimistic as to what we're seeing here," Ortiz said of crowds at the mall.

    One bright spot in the reports of declining numbers came from Richardson, which recorded a nearly 26 percent increase in its October collections because of a one-time adjustment.

    Without the windfall, the city's revenue would have fallen 5 percent. But leaders are not complaining.

    "It's a long year in front of us," Deputy City Manager Dan Johnson said. "For analysis purposes, we'll factor it out, but we're certainly welcoming that adjustment."