Waco Reporter

City of Waco officials need to plan for an $8 million loss in sales tax revenue based on COVID-19 shutdown scenarios, the city manager said.

Closures of all but essential businesses will cut sales tax collections that represent between 26% and 30% of the city’s general fund. Waco planned for $18 million in sales tax rebates for the rest of the fiscal year, which ends at the end of September, Deputy City Manager Bradley Ford told the Waco Tribune-Herald.

Ford said the city’s projections are based on what they’ve heard in the community and reports they receive. But they won’t know the full picture for a few months.

“Our sales tax contribution from the comptroller lags two months, so we won’t know a fuller picture until that June payment,” Ford told the Waco Tribune-Herald.

The 45% cut from projections – $8 million – is based on business closures through September. If closures end earlier, the estimate drops to a $1.8 million cut in anticipated revenue.

Waco budgeted for $39 million in sales tax revenue for the entire fiscal year. That’s about 30% of the city’s total revenue. The city is halfway through its fiscal year.

“The results for the first half of the year were really strong,” Ford told the Tribune-Herald. "We were already $6.3 million ahead through March."

That extra $6.3 million and a $1.7 million contingency budgeted in the sales tax fund provides a buffer for the second half of the fiscal year, he said.

Retailers account for almost half of sales tax revenue. Restaurants make up approximately 15% of the city’s sales tax revenue. Utility companies, wholesalers, manufacturers and other sources make up the remainder of the revenue. 

The city budgets conservatively for sales tax revenue because it’s volatile, especially in a city with a big tourism element with no guarantees of visitors, Ford said.

The 2021 budgeting process has started in city departments. Ford said it will be a conservative budget with no new programs or expenses. Ford said departments have started the budgeting process, and the city’s 2021 budget will likely be a conservative one. The large projects, including the Waco Suspension Bridge restoration project, will continue as planned, he said.

“We’re certainly having those conversations about what projects are ready to move forward and what projects aren’t,” Ford said.

Kris Collins of the Greater Waco Chamber of Commerce said Spring Break usually brings in travelers, making March a big month for retail. That didn’t happen this year with the coronavirus.

When businesses reopen, they’ll need to introduce health safety measures such as limits on customers inside their buildings, curbside pick-ups and other challenging adaptations, Collins, senior vice president of economic development for the chamber, said.

“In the situation we’re in right now, when businesses take those precautions I think it gives an extra level of comfort to their customers, that they’re looking out for their best interests along with their employees,” Collins told the Waco Tribune-Herald.