OKC sales tax revenue exceeds expectations

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Oklahoma City’s sales tax collections continue to exceed prior year projections and totals.
(Photo by Arno Senoner via Unsplash)

OKLAHOMA CITY — Municipal sales tax collections in the first half of fiscal 2022 are 18.5% higher than the prior year and 13.6% higher than forecast.

“We continue to have extremely strong sales tax growth,” City Manager Craig Freeman said in a report to the Oklahoma City Council on Tuesday. “Combined sales and use tax is approximately $24 million over budget.”

In light of the surplus, staff are considering a budget amendment for consideration by the board, Freeman said.

The January report – tax collections for the second half of November and estimated collections for the first half of December – shows that collections were more than 18% higher than forecast for sales tax and more than 17% for the use tax.

Sales tax is the main source of revenue for the general fund, which pays for the day-to-day operations of the city. The use tax is the second most important.

The retail sector accounted for 53% of sales tax collections in the January report, followed by hotels and restaurants at 16%.

Freeman also reported on the city’s July-December hotel tax collections, which are 62% higher than the previous year.

“You know, it was so bad last year with COVID,” he said. “If you go back two years, we’re about 4% above where we were… that’s a bit lower than what the annual growth would have been going forward, but it’s still a good sign where where is the hospitality industry and where is travel at the moment.”

The city’s 5.5% hotel tax funds convention and tourism promotion, fairground improvements, and event sponsorship and promotion.

The city’s interim financial report through December shows revenue exceeding expenses, in part due to higher-than-normal vacancies.

“Right now, our revenues are about $29 million more than our expenses. There will be a lot of things that will change by the end of the (fiscal) year,” Freeman said.

Looking ahead to fiscal year 2023, the board will meet for its annual budget workshop on Tuesday at the Oklahoma City Convention Center. The program will include an economic forecast by Russell Evans, professor of economics and acting dean of business at Oklahoma City University.

Councilman James Cooper said he wanted to hear Evans’ thoughts on how inflation helps the city’s revenue growth.

Freeman said inflation is definitely a contributor, but there are other factors.

“That’s one of the benefits of sales tax,” he said. “The fact that it is closely linked to the economy can be a danger for us, but the fact that it moves with inflation helps us because our costs are also increasing, our own costs as well as the costs of residents.

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