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Sales tax shortfalls predicted

Friday, April 3, 2020
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As statewide coronavirus mitigation orders continue to limit operations for local businesses, some area taxing authorities are anticipating significant decreases in sales tax revenue in the coming months.

Officials at the Lincoln Parish School Board, Lincoln Parish Police Jury, and city of Ruston say while it’s too early to know exactly to what extent revenues from sales tax collections will be affected, there is cause for concern.

“We’re very concerned about that,” Superintendent of Schools Mike Milstead said. “I do anticipate a dip in the collection of sales taxes, both at the state and local level.”

Gov. John Bel Edwards’ first restriction on public gatherings in order to slow the spread of COVID-19 came on March 13, as well as statewide school closures that same day. A stay-at-home order and further restrictions on non-essential businesses followed on March 23.

Originally slated to end on April 13, Edwards has since extended the measure through the end of the month.

Sales tax collections generated by local business make up roughly 25% of the school board’s budgeted revenue for the current fiscal year, or $18 million out of $72 million.

The district’s four half-cent sales taxes are mainly used to supplement teachers’ and other employees’ salaries and benefits.

In addition to that direct tax revenue, Milstead said the roughly $28 million in state funding could potentially also be affected if the Department of Education’s sales tax collections are drastically altered.

But collection figures for the month of March won’t be available for another month or so, and the full picture may take even longer to become clear.

“It’s kind of a mixed bag,” Milstead said. “You’ll have some stores that are doing pretty well, like grocery stores. But you wonder how many folks who own their own businesses in town, how long can they stay in business?”

Police jury Treasurer Holly Lowry said the parish is also in “wait and see” mode.

“I’m expecting a sizable impact for the month of March, but I don’t have a good estimate,” she said. “I would expect a decrease for March and April, and perhaps continuing.”

The two parish funds that depend on sales tax revenues are solid waste disposal, which funds the landfill, and the Lincoln Parish Detention Center budget.

Solid waste was expecting to see some $4.5 million in sales tax collections in the 2020 fiscal year, according to the original budget.

Lowry said any excess in those collections beyond what it takes to operate the landfill is usually distributed to local municipalities for assistance in their own waste collection programs.

About $1.6 million was budgeted for that purpose this year, but now that may be in jeopardy.

“If sales tax collection is decreased, you have the risk that the allocation to the municipalities will also be decreased,” Lowry said.

Meanwhile, a quarter-cent sales tax makes up slightly more than half of the detention center’s operating budget.

The prison entered 2020 with almost $2.6 million in reserves. If those reserves are ever depleted, it falls on the police jury and the city of Ruston to pay any overflow costs to operate the detention center.

Lowry said the funds in question could take a hit in revenue in the short term.

“We’ve been fortunate enough that we’ve had management and jurors who have not over-spent when money was there and have saved for a rainy day,” she said. “So that should limit the impact on those funds.”

Like the others, Ruston Mayor Ronny Walker said it was too early to know the extent of the damage to tax revenues, saying he could offer only “wild speculations.’

He estimated business at restaurants in town is already down 60% or more, as all dining rooms are mandated closed, and hotel business could be down more than that.

A new 1.75% sales tax on restaurants and hotels to fund the second phase of the Ruston Sports Complex brought in about $1.8 million in its first year in 2019. The city issued some $20 million in sales tax revenue bonds in early 2019 to fund the Phase II improvements and must make interest payments on that money yearly.

While other business goes down, Walker said grocery stores could uptick as much as 25-30%, and while that would help, it likely would not be enough to offset the losses in other areas.

“I’m afraid it’s going to be 60%-plus down,” he said. “I hope I’m totally wrong.”

—Nancy Bergeron contributed to this report.