At the conclusion of Thursday’s City Commission meeting, Finance Director Janet Jennings said she currently sees nothing in the general fund that’s a cause for concern.
“Property taxes collections through January were at 93 percent of what we billed in October, which was up from 91.5 percent collected at same point last year. So we’re very happy with our collection performance to date,” Jennings said.
“The (property tax) billings were up $412,000. Of course, we budgeted to be up, but we are even up $76,000 more than we budgeted. Our collections, even though I said our billings are up $412,000, our collections are up $861,000. That is coming through in our 93 percent collection rate.”
Although sales tax revenues remain up over last year, the amount collected so far is below budget nearly the same amount, $73,000, that property taxes are over budget.
“That’s going to be a swap through the first seven months. Christmas was down significantly. I’ve looked at details, but I’ve not been able to ascertain the reasons for those,” Jennings said.
“We were up significantly through the November collections, so it was the Christmas sales that were down about $111,000.”
Johnson City’s property tax and sales tax revenues make up 64 percent of the general fund’s budget.
City leaders budgeted property taxes growing 2.1 percent, or $696,258 in 2018, while local option sales tax collections were budgeted at 3.6 percent, or $758,290, over last year.
“While we are down $73,000 below budget on the sales tax portion, that does represent a 2 percent or 2.25 percent growth over last year. So we’re still 2 percent growth, even though we’re $73,000 under budget. It’s not all bad and bleak,” City Manager Pete Peterson said.
Peterson also noted that Johnson City’s lackluster sales tax performance isn’t unique, as the state of Tennessee reported its January 2018 sales tax revenues, which reflect Christmas holiday retail activity, were about 3 percent less than last year.
“(Local option sales tax revenue) is 24 percent of our general fund budget. It’s vital we continue getting that and that we continue getting growth, not just stagnant collections each year,” Jennings said.
Both Jennings and the commission alluded that online sales are slowly deteriorating sales tax revenues, since most online shoppers don’t pay sales tax or report it.
”I’ve had numerous people ask me how much (sales tax revenue) we’re losing. I’ve done some pretty deep research. What I’ve found is that even the economic experts across the state and outside the state cannot nail that number down,” Jennings said.
“The numbers are all over the place. You just cannot pin it down. We do know most likely we’re losing some, we just do not know to what degree. So the message is, ‘please shop local’.”
Tennessee law requires its online shoppers report and pay a “sales use tax” on purchases of tangible personal property that will be used in the state, but most shoppers either ignore or are unaware of this requirement.
“I would venture to guess the vast majority of people in the state of Tennessee break the law on a regular basis when they make online purchases,” Peterson said.
“I can tell you from personal experience you are open to being audited,” Commissioner Ralph Van Brocklin added. “I certainly had a visit a couple years ago from state officials to see whether or not I was paying my share of sales tax on online purchases.”
Commissioner Jenny Brock added, “When we don’t collect sales tax with online sales, it affects the amount of money we have to go to education, because we primarily fund our K-12 schools through sales tax.”
Peterson said the U.S. Supreme Court is set to rule whether or not states may collect sales tax from online vendors that do not have a physical presence in the state sometime this summer or early fall.
Overall, the City Commission’s message was to shop local, not just for sales tax revenues, but to support local business owners who actually provide value to the local economy through job creation.
“It’s much, much bigger loss than just the sales tax piece. We talk about the sales tax piece because that’s money out of the government’s pocket that we have to operate with. But a community-wide impact, it’s much larger than just the sales tax piece,” Peterson said.
Jennings also noted the city’s building licenses and permits, which indicate the level of investment in the community, are up $91,000.
“That’s always a good thing to look at as an indicator for future tax revenues, property tax growth,” she said.