Signs of some sales tax recovery in Sioux Falls in restaurants

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SIOUX FALLS, S.D. (KELO) — People started returning to restaurants and they were a few more people sleeping in motels in Sioux Falls, according to the June financial report for the city of Sioux Falls.

Although sales receipts reported in June at restaurants were still 28% lower than last year, that was an improvement from the 44% decline posted in the prior month, Shawn Pritchett, the city’s finance director said in a June financial report Tuesday to the Sioux Falls City Council.

The report is for May transactions submitted as June revenue, Pritchett said.

The improvement in the decline in restaurant sales should be the start of an upward trend, Pritchett said.

“I think we will continue to see improvement,” Pritchett said of restaurants.

Pritchett said there was also a small increase in hotel stays in the city.

Progress has been made in sales and use tax revenue over the past month but some of the recovery from the coronavirus pandemic will take longer, Pritchett said.

The city’s sales tax collection decreased by 3.4% for June over a 12 month cumulative period. The month over month data showed a 9.4% decline.

Nationally, May sales tax receipts declined by $6 billion or 21% compared to May of 2019, according to the Tax Policy Center.

Sales of liquor in Sioux Falls were up by 73%, a 1% decline from the prior month.

COVID-19 liquor buying habits in Sioux Falls mirror national trends as noted by Nielsen. Nielsen reported in June that the year-over-year growth rate for total off-premise alcohol dollar sales within Nielsen measured channels increased by 21.2% for the week ending June 13, according to the Advisor for the Wine Industry Network.

May and June sale receipts in several industries as included in the July financial report. City of Sioux Falls table.

There was a slight increase in lodging receipts at $7.9 million for a 73% decrease. Lodging receipts were $7.2 million in May for a 82% decrease.

Pritchett said hotels in Sioux Falls were still running 33% below occupancy rates compared to last year. The rate improved to about 24% below last year in mid July, Pritchett said.

The coronavirus pandemic slammed the hotel and motel industry in the U.S. in the past months.

“The hardest hit sector nationally, and in every state, has been leisure and hospitality, in which the accommodation and food services sndustry has lost 27% of its employment, or 3.9 million jobs,” a July 17 study by the Carsey School of Public Policy at the University of New Hampshire.

As of July 8, about 6 out of 10 open hotel rooms were empty, according to the American Hotel and Lodging Association (AHLA).

Although occupancy rates are improving in Sioux Falls, “we still have a long way to go,” before returning to last year’s levels, Pritchett said.

Entertainment tax revenue in Sioux Falls was down 5.6% in June over a cumulative 12-month period but down 35.4% in year over year monthly growth. The decrease of 35.4% is an increase from the decline of 47.3% in the prior month.

Entertainment tax collections from June 2017-June 2020 as presented in the July 21 financial report. City of Sioux Falls graph.

Sioux Falls is not alone in that decline. The arts, entertainment and recreation industry has lost 37%, or 909,000 jobs, as of June, according to the Carsey School of Public Policy.

The recovery for entertainment tax revenue will be slow, Pritchett said. Much of the revenue comes from sales at restaurants and hotels, he said.

The tax is used to pay for capital projects at city owned entertainment venue buildings like the Washington Pavilion.

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