<< Previous   of   Next >> Enterprise/CHRIS GOODENOW  (click to enlarge) Bob and Melanie Kitzinger, of Everett, sign papers to purchase a 2010 Harley Davidson Triglide at Lynnwood Cycle Barn. Sellers of motor vehicles and parts were among the hardest hit locally by lagging retail sales. Enterprise/CHRIS GOODENOW  (click to enlarge) Scooter barn manager Garrett Johnson (left) shows customer David Crawford, of Lynnwood, features of a 2009 Kawasaki Versus 650 at Lynnwood Cycle Barn.

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CONTACT THE ENTERPRISE Jocelyn Robinson, News editor jrobinson@heraldnet.com

Tax revenue sagging, city budgets lagging

City coffers hard hit by slumping retail sales

By Mina Williams
Enterprise editor

Shopping local has a bigger impact than simply supporting local business. The resulting sales tax revenues land in city coffers that in turn support local services citizens rely on daily, namely public safety and parks.

During this recession retail sales have slipped, putting South County cities on edge, feeling the financial impact of sagging sales tax revenues.

“We have no crystal ball to tell us when we will be back to where things were,” said David O. Kleitsch, economic development director for the city of Lynnwood.

Statewide, taxable retail sales declined 14 percent to $25 billion during the second quarter of 2009 compared to the same period in 2008, the largest April-to-June drop on record, according to the Washington State Department of Revenue. The retail trade piece of that picture, which excludes such industries as services and construction, dropped 10.7 percent to $11.1 billion.

Locally, the picture is a seesaw.

The city of Lynnwood — home to Alderwood mall — saw retail trade sales drop $59 million, or 17.2 percent. Edmonds' slipped 10.7 percent, nearly $7 million. Mill Creek saw a relatively modest 4 percent decline, a drop of $1.1 million. Meanwhile, on the other end of the spectrum, Mountlake Terrace posted a 13.5 percent gain of more than $1.3 million in taxable retail trade.

For Mountlake Terrace, it means that despite the current economic volatility, the city has been able to maintain services at levels the community has come to expect. No cuts are planned to key services, such as public safety, parks and public works, City Manager John J. Caulfield said.

“The city continues to hold its own financially,” Caulfield said.

But the picture isn't all rosy.

“While revenues are up from 2008, they are still quite a bit lower than the forecast and budget,” said Sonja Springer, financial director for Mountlake Terrace. “We are seeing an estimated $260,000 decrease for 2010 from our budget.”

The bigger hit comes from the city's portion of gambling tax, slipping due to a decrease in business and the shuttering of the Silver Dollar Casino. “Our 2010 budget was estimated at $1.5 million. That has been amended to $1.2 million,” Springer said.

Other cities also are hedging their bets.

“In November will be our mid-biennial budget review. Budget shifts will be addressed then,” said Kleitsch, in Lynnwood.

Under the umbrella of retail trade, the biggest losers were sellers of motor vehicles and parts, which saw taxable retail sales down 24.2 percent and 60.1 percent in Edmonds and Mountlake Terrace, respectively, followed by furniture and home furnishings, down 41.3 percent in Lynnwood. In Mill Creek, computers and software sales tax revenues were down 62.2 percent.

Retail trade gainers include electronics and appliances, up 134.4 percent in Mountlake Terrace; building materials, garden equipment and supplies, up 85.2 percent in Edmonds; and gas stations, lifting 26.7 percent in Lynnwood. Lawn and garden supplies and equipment had better luck with a 50.8 percent spike in Mill Creek.

Mill Creek Finance Director Landy Manuel said the city leaned on the gloomy side when anticipating sales tax revenues for past budgets.

“The City Council has done a good job budgeting,” Manuel said. “They've done a good job being pessimistic.”

For example, Mill Creek's council adopted the 2007-08 budget expecting to collect more than $3 million in sales tax revenues. The city ended up bringing in more than $4.4 million. The conservative spending habits mean the recession has not hit Mill Creek's city budget even as it cripples that of its neighbors.

But Manuel said the city is not indifferent.

“The expectations were set low but they did not severely come in lower,” Manuel said, quick to point out that Mill Creek does not have the secret to pinching pennies. “I'm not saying it's been easy,” he said. “It's been a tight year.”

Enterprise editor Katie Murdoch contributed to this article.