Consumer spending still up in Yuma

City spending increases as supply chain issues ease

Yuma consumers continue to spend money, which is reflected in the revenues collected by the city.

During a financial briefing on Tuesday, Doug Allen, finance director, explained that for the last couple of years, the city budgeted conservatively in case consumer spending dropped during the COVID-19 pandemic.

But, in actuality, residents continued to spend and even spent more than usual during the pandemic.

With this trend continuing, the city decided to budget less conservatively for fiscal year 2023, with the expectation that consumer spending would stay high.

And that’s exactly what has happened.

The city collects its revenues from the city local tax, property tax, state sales tax, income tax and the vehicle tax. Revenues in the first three months of the current fiscal year were 17% over the same time last year. In the second quarter, revenues were up 10%.

City staff knew revenues would be higher this year, but it has actually collected 2% more than the projected.

Allen explained that previous budgets were significantly less than what they projected just in case the expected revenues didn’t come in. This year, he said, “we just kind of said, well, let’s really budget what we think it’s going to be, put that revenue goal in a position where it’s not going to hurt the city if we don’t get there. But then we’re not restricting ourselves to what the city can do year over year.”

Consequently, city spending has been higher because many expenditures no longer have to be put off due to pandemic “caution” and supply chain issues. As supply chains continue to loosen, making previously deferred purchases now possible, such as buying vehicles, increased spending is expected to continue into 2024 and 2025.

But current spending levels are on mark. “So there’s no concern about any budgets being exceeded at this point in time,” Allen said.

Deputy Mayor Chris Morris asked Allen to explain the “big spike” in revenues and whether inflation contributed to it. “I mean, if things cost more money, it’s going to be more. If you spend more money, there’s going to be more tax revenue. If the cost of construction is higher and homes are of higher valuation, property tax can be higher.”

“Inflation is a factor,” Allen replied.

The other factor is the growing tax base in Yuma. Allen noted that during the pandemic, as California businesses and events

closed down, travel and tourism in Yuma significantly increased.

“It hasn’t gone down necessarily so those revenues have stayed about the same where we expected those to drop a little bit,” Allen said.

He believes more people are aware of Yuma now. “You can still see that winter visitors, snowbirds and tourists are still showing up in force, especially if you drive around town.”

Allen expected the city general sales tax and the 2% sales tax collected by restaurants, bars and hotels, which increased by 25.6% in 2022 over 2021, to level off in the next year or so.

The steepest increase in sales tax came from food for home consumption, which jumped by 29%, reflecting inflation.

However, construction taxes went down by 20% in the second quarter of 2023 when compared to the second quarter of 2022.

“Construction is lower than last fiscal year. Last fiscal year was still red hot,” Allen said. “Good news is we anticipated that in the budget so we don’t have to slow operations.”

In conclusion, Allen noted, “there’s no indication that revenues or spending trends warrant any kind of action by council.”

Nevertheless, he said, city staff will keep an eye on “any kind of disruption” to economic or consumer confidence such as issues related to supply chains, inflationary factors and the availability of materials and labor.

“Some of those reports just came up today. Still looking favorable, but we do have the flexibility in this budget to be adaptable if something were to change,” Allen said.