City officials puzzled by revenue spike

City officials puzzled by revenue spike
City officials are scratching their heads over recently released figures showing Vermillion's taxable sales more than doubled in one month – even before the opening of the new Wal-Mart store.

City Manager John Prescott said the community has enjoyed steady growth, but the sudden spike does not mesh with retail activity and other trends. The city needs accurate figures as part of its budgeting and planning process, he said.

"If you look at the balance of 2005, taxable sales are around $4.3 million to $6 million for each of the last three months. But then it's taxable sales of $13.5 million for January 2006," he said. "When we look at it, that number is way off. If we had that kind of increase, we would be having all sorts of traffic jams."

While taxable sales are not available for individual businesses, the sudden surge in January could not likely be attributed to Wal-Mart's opening late in the month, Prescott said.

"We had Wal-Mart open for only three or four days of January, and these figures were happening before Wal-Mart," he said. "If that was the case, then our sales-tax receipts aren't anywhere up to those numbers."

On the other hand, Vermillion's taxable-sales figure stood at $11 million in February 2006, which would mark a $2.5 million decrease for the community in Wal-Mart's first full month of operation.

Prescott said he plans to contact state revenue officials about the figures.

"We are trying to see if we can decipher with the state what it might be," he said. "Is it a reporting error? Is it because of something different? We will try to narrow that number down."

While the taxable-sales figure appears off, Vermillion has enjoyed a steady growth in its sales-tax collections, Prescott said. The city collected about $2.2 million in 2005 from its two-cent sales tax, compared to about $1.93 million in 2004.

"That's a nice increase. Each month in 2005, our sales tax was up from 2004," he said. "Then we have the ?bed and booze' tax. In 2005, that third penny brought in $183,000."

The growth is continuing this year, Prescott said. "We looked through the end of February 2006, and our sales-tax collections for the calendar year were 6.93 percent higher compared to the same period in 2005."

Mayor Dan Christopherson said he likewise questions the taxable-sales figures, but he noted the sales-tax collections reflect Vermillion's solid economic picture.

"We have been attracting new major businesses, and we certainly hope it enhances everybody else," he said. "There is a lot more traffic, and hopefully everyone gets an additional percentage from that traffic. That's the name of the game: to enhance collections, which have been very good."

Growth has come in other sectors of the community, Christopherson said. He noted heavy construction activity in Vermillion, along with increased enrollment at the University of South Dakota and higher visitor numbers.

"Obviously, we are trying to generate as much activity and traffic as we can. Some of it is beyond our control. It has to do with state conferences and things that come through USD," he said. "The city does contribute to USD recruiting efforts. We are supportive of all activities and efforts. There are more students and events on campus, almost every week. It's been very positive."

The increased level of summer camps and conferences during the summer has helped offset the loss of most USD students who are gone for vacation, Prescott said. In turn, that has helped level and even increase sales-tax collections

"For 2005, August and September were some of our better, higher sales-tax numbers," Prescott said. "If you looked at June 2005, when the University population was probably at its lowest, our sales-tax figures were still above February and March 2005."

Christopherson noted a large number of non-traditional students working on advanced degrees at USD during summer school, in turn spending money while in the community. Vermillion has also attracted more activities, conventions and visitor spending with improved facilities and accommodations.

Vermillion needs to generate outside dollars to continue its growth, the mayor said.

"You can't just trade the same dollars from the same pie," he said. "All these things are connected. Hopefully, we will have more activity with larger, new businesses generating traffic."

Vermillion has expanded its trade area and sales taxes with the Missouri River bridge bringing customers from Nebraska, Christopherson said.

"We definitely have a lot more of the Nebraska license plates in town," he said. "I think we get a very high number of persons utilizing services, especially health care, who then spend money elsewhere."

The city is gearing up for a number of projects which could eventually boost sales-tax revenues even more, Prescott said. State officials will decide in early May whether to schedule the Cherry Street renovation project in 2007-08 or 2008-09, affecting Vermillion's busiest retail section as well as the USD campus, he said.

Hopefully, the changes will mean even more economic growth and sales taxes, Prescott said.

"We are going in the right direction," he said.

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