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Finance Director Tracy Turbak will be making his monthly report at the informational meeting at 4 PM. So far, the sales tax growth is even more dismal than last year. For the first 3 months we are at 0% growth. Ouch.

Since I am not an economics major, I really can’t tell you why this downward spiral is happening. Obviously the farm economy isn’t doing well, but with Sioux Falls having so many residents, you would think this would not affect us this much. I still kind of wonder if we really didn’t recover from the last recession. Wages continue to be stagnant, and that is obvious with all the food banks growing and the lack of affordable housing.

11 Thoughts on “Sales Tax Revenue down EVEN MORE than last year

  1. I think it is primarily the farm economy that is doing it. From 2015 to 2016, farm income in South Dakota went down 57%. And when farm income is down, then rural citizens are less likely to travel to larger cities like Sioux Falls to do business.

    Plus, the continual growth of e-commerce will only get a further boost in our region as rural folks continue to explore and recognize the convenience of shopping at home and not going-off to towns like Sioux Falls, in order, to save money on gas and the wear and tear of their vehicles, especially during economic downturns in the farm economy; which will in turn have a lasting negative impact on the growth of urban economies, that depend upon the rural customer, as the prospects of the rural customer begin to trail-off for the urban markets due to new e-commerce market experiences and capabilities for the rural population – and not to mention that even urban shoppers’ growing interests in e-commerce are also straining sales tax figures for all levels of government, and that is reality that is not going a way either.

    On an entirely different note, I am waiting to see if the new 36% usury cap has impacted state video lottery figures. And if so, how much?

  2. scott on April 18, 2017 at 7:19 pm said:

    i would’ve thought with the with the millions and millions of dollars all the events event center brings in that sales tax revenue would go through the roof.

  3. I will contend the downward slide in tax revenue has a bit of the farm issues and e-commerce but unless we have a plan to grow local production based businesses. All our city leadership seemed to want here are satellite or franchise operations designed to suck the lifeblood out of the community.

    Our event centers are designed to make out of towners wealthy when they take our money and run. The money they take will never come back to grow our town and state.

    Elton john and Paul McCartney made more from the EC than the town ever will.

  4. l3wis on April 18, 2017 at 7:50 pm said:

    scott, it’s not going thru the roof, it’s going straight out the door.

  5. Its a Amazon economy and sales tax will need to be reinvented.

  6. hornguy on April 19, 2017 at 12:06 am said:

    I think Bruce nails the assessment of how businesses treat Sioux Falls generally. The struggle is how to become a destination for intellectual and financial capital, and not merely serve as a mailbox where big companies can launder their money. Huether and his many predecessors have ridden that one-trick pony about as far as it can go.

  7. “….and not merely serve as a mailbox where big companies can launder their money.”

    With that quote, the first thing that comes to my mind is the fact that Sioux Falls is ground zero for “Dynasty Trusts” and RV voters….

  8. The D@ily Spin on April 19, 2017 at 11:25 am said:

    Anything coming from city finance is imaginative. They use a Mulligan accounting method. Look at the empty store fronts along Minnesota, 41st, and 12th. Two department stores left. Three more are leaving. The city operates from sales tax. When unresident residents use this address to escape income tax and license fees, there’s no base. Along comes internet resources with lower prices, immediate home delivery, better selection, and NO SALES TAX. The city hasn’t allowed for the exodus of commerce. Our next mayor must focus on prosperity instead of tennis, concerts, and spas.

  9. But I would like to add further to this discussion. I actually think we are talking about two different things here. I do not disagree that the EC is removing money out of the Sioux Falls economy and only with transparent numbers on the revenue generated from the EC compared to the dollars that leave Sioux Falls will we ever know what is the true negative or less positive impact that the EC has on the Sioux Falls economy.

    However, to ignore the farm economy and e-commerce in assessing sales tax figures is to ignore the eight hundred pound gorilla in the room. To the degree that the EC is responsible for the collapsing of our local sales tax figures is limited or minimal to the impact that the farm economy and e-commerce are having on these sales tax figures.

    But that does’t mean that the EC theory doesn’t have merit. In fact, it is analogous to defense spending and the indirect negative impact such spending can have on an economy over time.

    Often defense spending is equated to an economic boom because manufacturing more tanks means hiring more people, which means more money for the economy. But the manufacturing of a tank is not the same as the manufacturing of a car, because the tank is likely to be removed from economy as soon as it is built, where as the car will immediately be used in the economy by its owner, thus causing direct and indirect positive multiplier effects for the economy.

    This removing of resources and its potential positive multiplier impact from the economy, which is what tank manufacturing does, especially in peace time or relative peace time, is analogous to giving McCartney or Elton John massive amounts of money which are removed from the Sioux Falls economy forever.

    One of the major reasons for the collapse of the Soviet Union was because of the reality what the EC theory asserts. Because throughout the 1970s and 80s CIA analysts estimated that the SU was spending about 20% of their GNP on defense spending, while the US was spending 5% of its GNP on defense. But after the collapse of the SU, analysts were allowed to look closer into the former SU economy and found that the figure was not 20%, rather it was 50%. And this 50% figure was greatly responsible for the massive sluggishness of the SU economy and its inability to meet its consumer needs and the political ramifications from such a reality, as well as to maintain a strengthening economy with positive economic multipliers in order to maintain and or potentially win an arms race with the West.

    So when one indicts the EC as a possible negative impact on the Sioux Falls economy, you are accurately identifying an economic model which shows concern for the absence of positive economic multipliers stemming from such a production, whether it be an EC and it events or a tank that is built and just sits at a military base somewhere.

    But the only difference between the SU example and the EC example is that the former example was a eight hundred pound gorilla in the room in time and place, while the latter is merely a contributing factor.

    I might also add, that to directly blame the types of businesses that come to Sioux Falls, or are encouraged to come to Sioux Falls, as a further reason for the collapse of our sales tax figures, only has merit if you can assume that a greater dependency upon home based economic development would garner better wages for our local workers and thus more local spending and better sales tax figures, but I question seriously if that could ever be a legitimate claim, however….

  10. anonymous on April 19, 2017 at 1:59 pm said:

    Hornguy Huether and his many predecessors have ridden that one-trick pony about as far as it can go.

    I wonder what the revenue from the bank franchise tax looks like for 2017.

    Several years ago, Citibank downsized from 3 buildings to 2. They are now in the process of downsizing to 1 building.

    The only thing they need to maintain in the state of South Dakota is their link to the Hurley State Bank.

  11. The Citibank story is definitely below radar for some reason. Although, a lot of the downsizing on site is due to more and more Citibank employees working from home. But I do know, that the New York “Suits” from Citibank were in Sioux Falls recently to access the situation and one can only wonder what that will lead too….

    And, Anonymous brings up a good point about the Hurley State Bank. As long as they have that charter, then their “work from home” employees could conceivably live anywhere as long as there is a Citibank monitor ready for “FaceTime” for operational support….

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