CHEYENNE – The last fiscal year ended nearly two months ago, but it was only recently that the city received a clear picture of how much local sales tax revenues have dropped.
When Fiscal Year 2016 began July 1, 2015, City Treasurer Lois Huff anticipated the city would bring in about $17.8 million from the county’s portion of the state’s 4 percent sales tax – the single biggest revenue source for the city.
Since sales taxes are two months in arrears, Huff only recently learned what the final take for FY 2016 was: $15.8 million, which is nearly $2 million, or 11.2 percent, below projections.
Huff said it’s just the latest confirmation that the slowdown in oil, coal and other energy-related industries has been taking its toll on Wyoming, including its cities and towns. And while energy extraction is not as big a part of the local economy as in other parts of the state, the decline in activity has nonetheless taken a sizeable toll.
“Sales tax revenue from mining operations is down 51 percent,” Huff said. “That includes equipment used in the oil and gas industry; I believe it’s all those Swan Ranch businesses out there (southwest of Cheyenne and west of Interstate 25) selling the pipe and equipment and everything they use in the extraction industry.”
Sales taxes from mining activity had been enjoying sharp growth in recent years, jumping from $3 million in FY 2013 to $6.1 million in FY 2014, then to $11.9 million in FY 2015. But those revenues collapsed toward the end of the last fiscal year, finishing at just $5.8 million.
“The other sector that’s down a whole lot is wholesale trade, which is down 29 percent (to $5.7 million),” Huff said. “That also has to do with the mining activity, if they’re selling products to the people going out there and building construction-related stuff for mining.”
In fact, sales tax revenues were down across the board, albeit by much smaller percentages in areas like retail trade, utilities, accommodation/food services and various miscellaneous industries. The only exception was a 4 percent increase in public administration sales taxes, which Huff said essentially translates to vehicle registrations, meaning the city sold more cars in FY 2016.
Despite the declines in sales tax revenues, Huff said the city was able to keep its budget balanced due to $2.8 million in spending reductions. For the current FY 2017, which began July 1, Huff said the city is anticipating $16 million in sales tax revenues, but she won’t have an idea how accurate that forecast is until the first sales taxes from July start coming in next month.
“We’ve already reduced our budget, and if we really feel like we aren’t going to be able to get $49 million in revenues this year (including $16 million in sales taxes), then we would certainly throughout the year be looking at expenditures to see where we could be cutting or saving by not spending,” Huff said. “It’s still early in the year; we’ll get our first sales tax payment for the current year coming in September, and that’s always a larger payment for us because of Frontier Days.”
But the city’s budget isn’t the only one being impacted by the slowdown in sales tax revenues. It has also impacted the projected timeline for when the current slate of sixth-penny projects will be fully collected on, as well as when the next set of projects will begin.
The current slate of projects was approved by voters in August 2012, to the tune of about $83.5 million. According to County Treasurer Trudy Eisele, of that original amount, there’s still about $10.5 million left to be collected.
Initially, Eisele had expected those collections might be completed by the end of this calendar year. But with collections slowing to about $1.4 million a month, she now expects the final sixth-penny revenues to come in sometime next spring.
“It’s going to be several more months beyond the first of the year to collect all of it,” she said. “That puts us into mid-March or after, but it’s anyone’s guess. I would never say things couldn’t pick back up.”
For that reason, the next list of sixth-penny ballot initiatives won’t go to the voters until May 2017, and the actual collections won’t start until even later.
That’s due to statutory limits on exactly when new collections can begin after the previous collections finish. Both are tied to the quarterly calendar, meaning that even if current sixth-penny collections reached their goal Feb. 1, the collections would not end until March 31.
“I have to notify the voters 60 days before a quarter (that collections are going to end),” Eisele said. “We never want to cut it off too soon, because we don’t want to end it before we get all the money the voters voted on.”
If the sixth-penny collections hit their goal early in the quarter, that means the rest of the collections are considered excess. When that happens, Eisele said the excess collections are placed in an interest-bearing account and held for a year, then are distributed proportionally to all of the previously approved projects as a sort of extra payment on them.
The same rules apply to when new project collections can begin, meaning that if current collections finish in the first quarter of 2017, collection for the new projects approved in the May 2 election wouldn’t begin until Oct. 1. That would essentially provide county residents a 1 percent tax holiday for six months.
“With the next sixth-penny election being May 2, that’s not 60 days before the (end of the) quarter,” Eisele said. “They would have had to hold the election in April to give me time for the vendors to get notice to start collecting any earlier.”
While the next sixth-penny election is still nine months away, municipalities, including Cheyenne, are already beginning to prepare project lists for the ballot. Cheyenne’s City Council will meet at 5:30 p.m. Aug. 31 and Sept. 1 to go over 20 proposed projects, with the aim of paring that list down to fit the $100 million limit established by the County Commission.
Both meetings will be in the Council Chambers at 2101 O’Neil Ave., with the chance for public comment Sept. 1.