I’m guessing that some readers are already weary of hearing about various issues related to the special purpose local option sales tax, commonly known as SPLOST.
Take heart. One way or another, the intense debates will be settled at the ballot box in less than two months.
In occasional columns over the next few weeks, City Talk will look at the projects slated for funding with the $370 million in sales tax revenue anticipated over the next six years if voters approve the November referendum.
I’ll devote one more column to the city of Savannah’s much-discussed project list, which is dominated by funding for a new arena.
The city is only getting about half of the total SPLOST revenue, however. So I’ll devote a column to Chatham County’s project list, which totals over $130 million.
And City Talk will take a look at the $40 million or so that will go toward other municipalities’ infrastructure projects.
But today let’s just consider $370 million estimate.
The current round of SPLOST will bring in something around $357 million when collections end in September 2014, far below the estimate of $445 million when the tax was approved by voters in 2006.
That 2006 estimate might have been a little optimistic even at the time, but the massive shortfall is primarily a reflection of the severity of the decline in retail sales in the wake of the housing bust and financial crisis.
So if we’re collecting $357 million after six lousy years, why are we only anticipating $370 million in SPLOST revenue over the next six years?
City spokesman Bret Bell told me in an email that the city and county finance offices have been in consultation and that $370 million is “the best estimate we have at this time for what actual revenue will be from 2014-2020 based on financial information available at this time.”
Bell also noted that earlier this spring the state of Georgia changed its system of automobile taxation, replacing the sales tax on vehicles with a title fee. A portion of that fee is redistributed to local governments, but none goes directly toward SPLOST.
I decided to work up my own estimate, just for fun.
I did some digging into recent state revenue data to get a sense for the impact of the new car title fee on sales tax revenue. And then I ran some numbers with fairly cautious assumptions about the combined impact of economic growth, population growth and inflation.
For the first estimate, I came up with $374 million in total SPLOST revenue over six years.
Under a slightly more optimistic scenario that I consider relatively conservative, the estimate exceeded $390 million. If I had to bet over or under on that number, I’d take the over.
But what about the likelihood of another recession?
Well, given historical patterns, we are likely to see another recession by 2020.
However, we are unlikely to see another recession that approaches the severity of the recent one.
Home sales and retail sales cratered in the aftermath of the financial crisis. Even if there is another slowdown, some sectors of the local economy just don’t have all that far to fall.
And there are numerous reasons to expect local retail sales to pick up more than suggested by the more cautious estimates.
The local population is increasing. There are several significant retail developments in the works. Tourism is likely to increase.
Even if the recovery remains sluggish and the job market remains depressingly stagnant, home sales and construction will likely increase from their current levels, which will translate into additional spending on big-ticket items like construction materials and durable goods.
For sales tax revenue to fall dramatically short, we would likely have to experience some kind of catastrophe or black swan event.
What will happen to sales tax revenue if there’s a proliferation of sovereign defaults? Or if there’s another war far larger than those we’ve been fighting? Or if the Georgia coast is decimated by a major hurricane?
If any of those things happen, I’m assuming we’ll have a lot more to worry about than tens of millions of dollars in lost sales tax revenue.
City Talk appears every Tuesday and Sunday. Bill Dawers can be reached via billdawers@comcast.net and http://www.billdawers.com. Send mail to 10 East 32nd St., Savannah, Ga. 31401.
By Bill Dawers