Expected slump in entertainment, lodging revenue continues in Sioux Falls

KELOLAND.com Original

SIOUX FALLS, S.D. (KELO) — There was no surprise in the November finances for entertainment tax and lodging tax receipts in the city, Sioux Falls Financial Director Shawn Pritchett said.

Both were down in the 12-month rolling average and in October from October 2019, Pritchett said in his financial presentation to the city council on Dec. 15.

October activity is shown in November receipts.

The rolling 12-month average for lodging tax receipts decreased by 24.1% and by 32.1% for October compared to October 2019, Pritchett said.

Local hotel occupancy rates reflect that downturn.

The rolling 12-month average for entertainment tax receipts as down 11.4% in November. It was down 14.3% for the month compared to the same time in 2019. The entertainment tax is the third penny tax generated at hotels, restaurants and bars.

City of Sioux Fall graphic

October transactions declined by 10% or $3.6 million in October after no increase in September.

The two sectors were disproportionately impacted by the coronavirus pandemic than many other economic sectors in the city, he said.

Pritchett said he expected downturns to continue into next month. The downturn in hospitality industry, which includes lodging, could last longer, he said.

CNNBusiness’s COVID-19 economic tracker shows that the hotel occupancy rate in the U.S. is down 37.90% over last year as of Dec. 5. Domestic air travel was down by 65.8% from last year.

Although CNNBusiness said South Dakota’s economic is operating at 89% of what it was in March, the financials in Sioux Falls indicate that even if the state is at 89%, there are still declines.

Total taxable sales for Sioux Falls in October dipped by 2% after a 1% increase in September. That’s a change of $12.8 million.

City of Sioux Falls table

Sales tax revenue accounts for $70.1 million or about 38% of the city’s general fund revenues in fiscal 2021 budget.

During an economic forecast report on Dec. 16, U.S. Federal Reserve Chairman Jerome Powell said service businesses, including bars and hotels were still struggling in the U.S.

The recent November and December surge in COVID-19 cases in the U.S, has larger impact on this sector than prior surges, Powell said. As people stopped gathering in bars and restaurants and didn’t say in hotels, “now we are beginning to see that show up…,” Powell said.

Yet, as he discussed the downturn in sectors of the economy, Powell also acknowledged that COVID-19 vaccinations started this week.

The progress of the vaccinations will impact the economy but by how much and how quickly is yet uncertain, Powell said.

“(Perhaps) by the middle of next year people will feel comfortable about going out (to bar, etc),” he said.

While there were expected continued rolling 12-month deficits in entertainment and lodging receipts, Pritchett also reported some brighter spots in the local economy.

The value of building permits as of November was $670 million, only about $60 million from 2019, he said.

Permits for multi-family housing and single family housing were up over November in 2019, Pritchett said.

Property owners have continued to pay property taxes, which is another big source $(70.8 million) of revenue for the city’s general fund budget.

The city has collected $63.6 million in property taxes compared to $60.2 million in November of 2019.

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