County Sales Tax Slump – Fluke Or Trend?
Sales tax is one very important component of the budgeting process for Jefferson County. Healthy sales tax revenue converts to pennies on the property tax, as the funds generated from sales tax for both cities and the County are split with the Department of Education and go toward the County’s mandatory financial commitment or maintenance of effort for the school system. When the sales tax revenue dips, the mandatory funding must be met with other monies, generally coming from property tax. In the past several budget cycles Jefferson County has experienced healthy sales tax growth. For the 2015-16 fiscal year, Jefferson County enjoyed a 21.4% growth in sales tax. While that kind of growth rate may be difficult to maintain, the first two months of the current fiscal year out produced the same months in the 2015-16 fiscal year. Though July and August 2016 were strong sales tax months, growth slowed beginning in September and that trend continued through October. In November, sales tax actually fell below the November 2015-16 numbers and the decline picked up pace with Jefferson County closing out 2016 on a decline. Overall, sales tax is still up 2.2% year to date in the County and numbers are still out for the first month of 2017. With the sales tax numbers in a down turn for the first time in several budget cycles and numbers not yet available on January 2017, it is unclear what impact will be seen in the proposed 2017-18 budget document.
If the County is experiencing a sales tax slump, it is echoed in the local municipalities, with the exception of Dandridge which showed a climb in sales tax. Speculations surrounding the sales tax numbers include an increase in online shopping during the holiday months that had national impact, as well as hitting the local coffers. The local portion of Jefferson County sales tax is divided into two parts with the total of those parts tallying 2.75%. The remaining 7% that comprises the 9.75 % sales tax goes to the state but the local portion of 2.75% stays inside Jefferson County. 2.25% of that total is split 50/50 between either the county or municipality(depending on the location of the purchase) and the schools. By resolution, the County Commission allocated the remaining .50% to Debt Service to pay for general obligation bonds that are earmarked for school debt. Numbers for January 2017 are not expected to be available for several weeks, however they should give an indication if the fiscal year end sales tax slump was just temporary or if it will have a larger impact on the upcoming budget season.