As infrastructure needs loom, records reveal Scottsdale economy on even-footing

From left are Scottsdale City Attorney Bruce Washburn; City Manager Jim Thompson; and Treasurer Jeff Nichols (Independent Newsmedia/Arianna Grainey)

A three-year snapshot of sales tax collections at the city of Scottsdale paints a picture of economic stability and strong gains bolstered by continued growth in the local tourism, automotive and retail industries.

City sales taxes collected over the past three years in all three categories have seen solid improvement, according to records provided to the Scottsdale Independent.

The numbers show a steady stream of sales tax dollars that have finally equaled and then surpassed totals last seen prior to the start of the Great Recession.

But even though the trends are positive, some city officials remain guarded in their optimism and say several factors could easily come into play that could slow or reverse those numbers.

In Scottsdale, consumers pay a 1.65 percent sales tax on purchases. That revenue is used by the city to finance the cost of various services, such as the local police and fire departments, parks, libraries, and street maintenance.

“The collection numbers have shown growth,” said Scottsdale City Treasurer Jeff Nichols. “For automotive, we’ve had some new car dealers move in as others move out so the impact of these changes haven’t been as significant.”

A breakdown of sales tax remits for automotive, retail and lodging are:

  • Numbers show the automotive category brought in $22,650,036 in fiscal year 2014-15 followed by $23,725,834 the following year and $24,517,625 last fiscal year.
  • Numbers show the hotel/motel category brought in $8,777,465 in fiscal year 2014-15 followed by $9,177,196 the following year and $10,596776 last fiscal year.
  • The miscellaneous retail category brought in $28,019,513 in fiscal year 2014-15 followed by $29,915,535 the following year and $30,130,522 last fiscal year.

Sales tax collections have increases nearly $2 million in each category over the past two years. Even at a time when the retail sector nationwide is facing uncertainty, sales tax remits from retail sales in Scottsdale has remained strong.

“Retail is a sector that is evolving,” Mr. Nichols said.

“It’s possible that our tourism has assisted with keeping our retail tax collections up. e-commerce is on the rise. Any of the e-commerce sites that have a physical location in the state should be paying tax for items delivered to Scottsdale addresses.”

In all, numbers show the city of Scottsdale collected $163,894,169 in sales tax remits over the 10 taxing categories in fiscal year 2014-15 followed by $171,255,885 the following year and $168,318,481 last fiscal year.

Despite the strong numbers, Mr. Nichols points to several changes on the horizon that could impede that growth.

“Scottsdale is a tourism hub for the state,” he pointed out. “Hotel tax collections will be a category to watch in the future as there are several hotels that have been proposed or are being built. Adding to the supply of hotels can influence the average daily rate and occupancy rates, which affects the overall tax collections for the category.”

But a pillar of local sales tax continues to be the automotive sector. Scottsdale continues to see gains year after year, numbers show.

“In recent years automotive dealers were offering deals coupled with the interest rates being low,” Mr. Nichols said. “We had some new car dealers move in when others moved out, which resulted with less overall impact. Now that interest rates are going back up, there may be a change in the coming years. With the opening of the Scottsdale Autoshow at Salt River we may see an impact due to dealers moving to the location, which is outside of Scottsdale.”

Scottsdale continues to be a popular destination for shoppers, but Mr. Nichols says that could change as more and more consumers shop online. Online sites that have a physical location in Scottsdale are required to charge the local sales tax.

According to Mr. Nichols, sales tax from e-commerce transactions are becoming more commonplace.

“Some retailers are doing more toward building their e-commerce side,” he said.

“If they have a physical location in the state, then the sales made through e-commerce should result in taxes being paid for items delivered to Scottsdale addresses. Since Scottsdale has one of the most popular and largest malls in the country the retail impact of any retail downturn is not as significant as other locations may experience.”

Scottsdale Councilwoman Linda Milhaven and Suzanne Klapp during a recent public hearing at City Hall, 3939 N. Drinkwater Blvd. (Independent Newsmedia/Arianna Grainey)

Scottsdale Councilwoman Linda Milhaven says from a historical perspective, sales tax collections have nearly recovered from the depths of the Great Recession. Once inflation is factored in, however, she says the gains aren’t as strong as the numbers suggest.

“If we look at sales taxes (over the past 20 years), we are still just coming out of the Great Recession and we are about 10 years later.”

Ms. Milhaven contends sales tax remits are flat after considering inflation rates, which illustrate the value of the American dollar.

“If you consider inflation rates, we are back to the same dollar amount,” she said. “Yeah, it is all good, but I think we need to be cautious. I think we can feel good about those numbers but we have an uncertain future. We can look at the last three years and say we are up, but we are just coming to pre-recession years levels.”

From the depths of the recession

Scottsdale budget Director Judy Doyle says the three-year snapshot provided to the Independent suggests an economy keeping pace with the stability.

“Prior to the recession, the 12 months ending November 2007 had the highest total (of sales tax remits) of $179 million,” she said. She points out that April 2018 numbers show promise.

A view of Old Town Scottsdale, which continues to be the focus of municipal redevelopment musings. (Independent Newsmedia/Arianna Grainey)

“During the recession, the 12 months ending December 2010 had the lowest total of $124 million (in sales tax collections). The 12 months ending April 2018 now has the highest total of $191 million. These numbers show that the local Scottsdale economy has turned the corner from the most recent recession.”

Mr. Doyle and her team keeps an eye on more than just sales tax remits in order to evaluate the strength of the local economy.

“The trends from taxpayers in the various classifications are monitored to determine how well each sector is performing,” she said, also noting national economic data is routinely examined.

“Bankruptcies, closures, new openings are also monitored to see the impact it has to their respective classifications. If the impact is large enough, forecasts are revised to see if additional action will need to be taken with respect to the budget. Regional economic reports are reviewed to get a general idea where the economy is going on the regional level.”

In terms of inflation and personnel costs to the municipality, Ms. Doyle thinks the overall numbers present a bit more sobering picture.

“While the revenue side of the budget for tax collection purposes has recovered from the recession, costs such as retirement, healthcare, etc. have continued to increase and out-pace collections,” she said.

Northeast Valley Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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