Statewide Drop In Taxable Sales Hits Local Municipalities But City County Say Theyll Make Do
Written by Risa Polansky on September 4, 2008
By Risa Polansky
As local governments tighten their belts to make up for money lost to property tax reform for the second year running, they face now another challenge: less revenue from consumer spending.
Taxable sales in Florida dropped for the first time in nearly half a century during the state’s 2008 fiscal year, down 5.4%. Miami-Dade County wasn’t hit as bad, but it’s sales still dropped 2.6%.
The decrease may affect local governments as they see a share of the state’s sales tax revenue. This means, with taxable sales down, the governments may be getting less than projected.
Miami-Dade also collects its own taxes based on spending, such as hotel bed taxes, and food and beverage taxes. It shares some of that revenue with the City of Miami.
State shared revenue makes up about 2.4% of the City of Miami’s budget, said Michael Boudreaux, director of management and budget in the Office of Strategic Planning, Budgeting and Performance.
The city is to take in $1.7 million less in state shared revenue than budgeted this fiscal year, which ends this month, "due to lower than expected sales tax collections at the state," he said. "It created an unexpected outcome for ’08, but like all budgets, we have to adjust for collections that don’t come in as anticipated and compare that against expenses."
Money saved by spending less than budgeted in various areas can help fill the $1.7 million gap, Mr. Boudreaux said. But "whatever we don’t make up in fluctuations in expenditures, it will be covered by the contingency reserve."
That’s what the city’s $5 million in reserves is for, he said: "to help buffer any fluctuations in collections and expenditures."
Miami-Dade County shouldn’t have to reach into its reserves to make up for dips in state revenue collections, said Daniel J. Alfonso, the county’s operating budget coordinator.
He’s still computing projections and has not yet quantified the drop in expected revenue, but he said he expects the county to absorb any potential losses because of the state’s rule that a local government only budget for 95% of anticipated revenue.
"For the most part, our projections for the current year are going to be fine," Mr. Alfonso said. "We’re going to be within the buffer."
Strategic Business Management Director Jennifer Glazer-Moon said the same at a county revenue estimating conference last week.
"Generally across the board with state revenues, we were conservative with our numbers, and what (the state is) coming up with is close to what we were saying initially," she said. "It’s why you budget at 95%."
State officials project taxable sales will remain down next year.
Earlier this month, the General Revenue Estimating Conference reduced its estimate of Florida’s general revenue collections for the 2008-2009 state fiscal year by $1.8 billion — 7% below a March 2008 estimate.
"Next year, we’re (the City of Miami) projecting less because the state is projecting less," Mr. Boudreaux said. "For next year, we know the information, it’s not a surprise anymore, so we adjust the budget based on that information."
The county is doing the same.
It’s common practice for the state "to be less conservative initially and come down later," Ms. Glazer-Moon said.
The county does the opposite, budgeting conservatively to avoid constant tweaks as the state adjusts its numbers.
July projections show Miami-Dade is likely to yield this fiscal year about $126.3 million through the local government half-cent sales tax program. In fiscal 2008-2009, the proposed budget anticipates about $121.5 million.
The number is less than what officials actually expect to collect, reflecting the "budget at 95%" policy, Ms. Glazer-Moon said. She expects in the end to take in about the same as this year.
"We’re assuming, because of the economy, that it’s going to stay flat," she said.
At a county Budget and Finance Committee meeting last week, she told commissioners that "we don’t feel like we need to make any further adjustments down at this point."
She noted, however, that even budget officials can’t predict the future.
In a separate interview, she pointed out a bright spot locally: South Florida’s economic engines offer a unique buffer to statewide trends, as reflected by recent statistics.
Taxable sales statewide are down more than twice the percentage points of taxable sales in Miami-Dade, 5.4% compared to the local 2.6% drop.
Our tourism-driven economy helps us stay ahead, drawing in European visitors who have money to spend even as the US economy drags, Ms. Glazer-Moon said.
Also, in the case of a hurricane, consumer spending spikes. As soon as a storm is predicted, residents buy materials to prepare, she said, and once a storm hits, they spend to repair any damage.
"South Florida" Ms. Glazer-Moon said, "does not necessarily track with the entire state." Advertisement