Lafayette Consolidated Government Releases Sales Tax Update

The Lafayette economy appears to have made a strong rebound in June, as just released City of Lafayette sales tax collections indicate a two-percent increase from this time last year.

Posted: Aug 10, 2020 2:09 PM

LAFAYETTE - The Lafayette economy appears to have made a strong rebound in June, as just released City of Lafayette sales tax collections indicate a two-percent increase from this time last year.

Collections for July (which reflect June sales) totaled more than $7 million, a two-percent increase over collections for July 2019.

This is good news for the citizens of Lafayette. The budget proposed by the City-Parish administration was built on the assumption that the City of Lafayette’s sales tax projections would be severely impacted by the Covid-19 crisis. Much higher than anticipated collections open the door for more flexibility in the ongoing budgeting process.

Sales tax collections that reflect sales that took place in March, April, and May were down 14.9%, 21.1%, and 14.9%, respectively, from those same months in 2019. Because of this, the administration’s proposed budget assumed that the City of Lafayette would end this current fiscal year with only $67 million in collections.

But the two percent increase just reported Monday means that, should the positive trend continue, the City of Lafayette would actually end the current fiscal year with $79.4 million in collections — an increase of more than $12 million than projected in the proposed budget.

Here is a break-down of Covid-related dates that give context to the restricted economic activity and resulting sales tax collection decreases.

On March 13, Governor Edwards announced the closure of schools.
On March 23, the governor issued the stay-at-home order.
On April 16, Mayor-President Guillory issued his Safe Shop order clarifying which businesses would remain operational and under what conditions.
On May 15, Louisiana began to increase activity due to entering Phase 1, which opened dine-in service and other types of businesses.
On June 6, Louisiana moved into Phase 2, which further expanded allowable economic activity.

“The pretty severe dip the city saw in sales tax collections during the shut-down definitely gave us a reason for us to be careful in how we budget for the future,” City Council Chairman Pat Lewis said. “But I think we have also seen the positive impact of the gradual, responsible re-opening of businesses. It’s very encouraging to know that business activity was at a ‘normal’ level in June.”

The positive June sales tax activity numbers coincide with the beginning of Phase 2. The lowest month of activity for sales taxes was April, which reflected the only full month where all activity was shut down by the stay-at-home order.

The Mayor-President’s budget predicts that sales taxes in the City of Lafayette will decline 27% from what was collected in the 2019 fiscal year (that’s the last, full “normal” year on which to build a projection). The month of April, for comparison sake, was down 21.1% from April 2019, meaning that the administration’s proposed budget projected a full year of economic decline worse than the shut-down.

Given Monday’s good news, it would make sense to revisit the assumptions that underlie the proposed budget, Lewis said.

“Projecting a full 27% decrease from the 2019 budget is unrealistic, and I think that has led to false pressure to close facilities and lay off employees,” Lewis said. “Now that we have a better sense of what the economic recovery may look like for Lafayette, it’s important that we take a more reasonable look at how to project revenue going forward.”

The Mayor-President’s budget reflects roughly $6 million in cuts to the Parks and Recreation Department, Lafayette Science Museum, the Cajundome, the Heymann Performing Arts Center, and the Acadiana Center for the Arts. These are all activities that are 100% funded with city dollars.

If the City Council decided to project the rest of the current year and next year’s sales tax revenues at “only” a 15% decline from 2019 — to reflect the type of slower economic activity that occurred in Phase 1 as opposed to the more dramatic 27% decrease predicted by the administration) — that would free up an additional $6.5 million to the City’s General Fund more than what is currently projected in the administration’s proposed budget.

“I don’t know how the budget process will end up next month, but I am encouraged by the positive economic news,” Councilwoman Nanette Cook said. “It is important for all of us as elected officials to remember that we have a responsibility to the taxpayers to make wise, informed decisions with city tax dollars. While we are not out of the woods yet, this is very good news for the citizens of Lafayette that things are improving.”

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