Sales tax revenue declines

›› The Woodlands saw a dip in sales tax revenue in the fourth quarter of 2015 after five years of growth.

The Woodlands saw a dip in sales tax revenue in the fourth quarter of 2015 after five years of growth. While Township financial advisors say that the drop was foreseen and they’re prepared to weather the hit, some board members are inclined to be more cautious with spending moving forward.

“Over the past three-to-four years, growth in the retail sector has been exceptional, but in the past three-to-four months, we’re starting to see a more flat rate,” said Monique Sharp, assistant general manager for finance and administration for The Woodlands Township. “As long as it stays flat or marginal, then we’ll be good … this is something we’re going to watch carefully.”

Sales and use tax collection, which accounts for 43 percent of the township’s total revenue sources, dropped by 5.7 percent in October, November and December 2015 compared to the same time period in 2014. Tax collection data is reported on a two-month lag, so these figures repre- sent taxes from July, August and September.

Sharp explained that the fourth quarter drop could be attributed to one of the major retailers changing the schedule when it reports figures, but for the sake of caution, she proposed a couple of options to make the 2016 budget more conservative in case revenue should continue to fall.

She suggested delaying a planned $1.6 million irrigation project and the $1.2 million renovation of Northshore Park.

“We could seriously be looking at not being able to do things we’ve been planning on doing,” said board member and chairman of the Convention and Visitors Bureau Gordy Bunch. “All we know is that last quarter was not good… We need to be very concerned and cautious as we go on throughthe year.”

The Woodlands has seen a consistent drop in the sales tax growth rate since the post-recession economic boom in 2011 — with 20 percent growth in 2012, 13.8 percent in 2013, 9.4 percent in 2014 and four percent growth in 2015, with a projected 2.7 percent growth in 2016. Andin spite of the fourth quarter dip below projected revenue, the township collected more than $51 million in sales tax revenue in 2015, about $2 million more than in 2014, according to township reports.

While the retail trade — which contributes 44 percent of sales tax revenue — wholesale trade, accounting for 7.6 percent, and accommodation and food services, 12.1 percent, saw overall growth in 2015, several industries took a significant fall. Construction industry sales tax revenue dropped by 30 percent and mining, oil and gas extraction fell by 24 percent. Both the real estate, rental and leasing industry and the construction industry sales tax revenue dropped by 50 percent in the fourth quarter of 2015.

With The Woodlands population growing by more than 10,000 — from about 98,000 in 2010 to nearly 110,000 in 2015 — construction activity peaked in the past couple of years. Sharp said the township anticipated a slowdown in construction as the community began to approach build-out.

Meanwhile, other Houston suburbs have experienced similar — and in some cases more severe — economic slowdowns in 2015, a trend that was reflected nationally and closely tied to the downturn in oil.

Comparable communities, such as Sugar Land and Pearland, have also seen drops in retail sales tax revenue — and those more reliant on oil and gas extraction have taken a harder hit, Sharp said. The city of Houston has been hit even harder than the suburbs, she added.

But the economic sky isn’t falling in The Woodlands just yet.

“We tend to be very conservative on the expense side,” said board member Mike Bass. “We historically come in under budget.”

And Sharp said, with a few more years of commercial and residential construction anticipated before the community caps out, The Woodlands should be able to hold strong.

“The township is well positioned financially to weather a decline in sales and use tax revenue, should it occur,” Sharp said.