It will get rough for revenues but it will get better, city financial official says

KELOLAND.com Original

SIOUX FALLS, S.D. (KELO) — It will get worse but it will get soon get better, a Sioux Falls official said about sale tax revenue.

The city lost 2.6% in sales tax revenue in the April financial report. The report reflects losses from the coronavirus pandemic for about one-half of March. The entertainment tax revenue sustained the biggest blow with a 24.3% decline for the April report.

City of Sioux Falls chart on entertainment tax revenue which shows a 24.3% decline in revenue in the April financial report.

The decline will be even larger for April which will be included in the May financial report, said Shawn Pritchett, Director of Finance for the City of Sioux Falls.

The city is not surprised by the latest revenue figures.

“We are well within the parameters expected,” Pritchett said of the city’s sale tax revenue reported for April.

Pritchett said as the city considers further loosening or eliminating restrictions related to COVID-19 and business operations, actual figures from May should be better than originally expected. Those will be reported in June.

“The postive is that things are opening up faster than expected,” Pritchett said. “The economy (should) pickup faster than we expected.”

While revenues won’t return to 2019 levels within a month, Sioux Falls has an advantage over some other areas, Pitchett said.

“We are in as a positive position as we can be as a community because we were not as impacted (as other areas),” Pritchett said.

The two lifebloods of revenue for the city are property tax and sales tax.

Sales tax revenue numbers are month behind because businesses collect the tax, pay the tax owed and in turn, the state pays the city.

Strong revenue months from January through at least the first half of March helped to offset any revenue losses in the second half of March.

When general fund revenue figures from the first four months of 2020 are compared to 2019, the city has been keeping pace but that will change as the COVID-19 impact is shown in actual April numbers.

While essential businesses such as grocery stores had healthy sales in March, businesses such as bars, restaurants, hotels, entertainment venues and similar didn’t fare as well.

Retail stores closed in mid or late March. Travel dropped off and consequently, so did stays at hotels. Restaurants closed dining rooms and some did delivery, take out or curbside service only.

The public adjusted behaviors, Pritchett said.

“Grocery stores, people were stocking up on certain items. Apparel stores were closed and the only alternative was online,” he said.

City of Sioux Falls sales tax chart for April 2020 as and percentage change.

Overall, there was a 2.4% decline in entertainment tax revenue year to date compared to January through April of 2019. But the revenue plummeted by 24.3% in the April report which reflects March. That’s for roughly two weeks of COVID-19 impact.

Although Pritchett said the impact of COVID-19 may not have been as bad as in other communities, it will still take time for some entertainment venues, bars, restaurants and hotels to rebound.

Not everyone will be ready to return to a bar or restaurant, he said.

Also, the national scene and economy also has an impact on Sioux Falls. Until travel increases motels will continue to be challenged, he said.

But, the COVID-19 situation in Sioux Falls can also create some advantageous, Pritchett said.

The city was able to attract a live audience Professional Bull Riding event this summer because of the COVID-19 recovery happening in the area, Pritchett said.

Other similar events could follow, he said. Still, the most likely events to return at a normal level will be local events sponsored by corporations for employees or events for the public.

The city is already getting inquiries about such events, Pritchett said.

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