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Modesto 2nd quarter sales tax off 22%

Springtime didn't put a spring in local shoppers' steps this year.

Sales tax receipts across the region took a dive during the second quarter, with Modesto weathering a 22 percent drop compared with the same period last year, according to revenue analysis firm MuniServices LLC.

Modesto's double-digit slide was the worst quarterly performance the city has seen in the past year. Most area cities saw similar declines. Riverbank was the sole bright spot: Its sales tax receipts declined a mere 7 percent.

The poor performance this spring puts extra pressure on the holiday shopping season to shore up struggling retailers.

But Modesto officials say there are signs that the "bloodletting" could be over, as Councilman Brad Hawn put it. The city projected a 7 percent decline in sales tax dollars this budget year, but estimates now show the drop-off could be as low as 3 percent, Hawn said.

That's movement in the right direction. Last year, Modesto sales tax revenue came up $800,000 short of the $25.3 million it was expected to bring in when the City Council adopted the annual budget.

City leaders watch sales tax figures closely because they're a key part of the city's budget. Sales tax accounts for about 22 percent of the city's general fund, the pool of money that pays for services including police, fire and parks.

Despite the overall decline this spring, officials say they've seen isolated improvements that give them hope. The city's florists and nurseries, food markets and liquor stores showed "modest increases" in second-quarter sales tax receipts compared with the same period last year, said city budget analyst Cynthia Gale. "I don't think we're ready to send up the celebratory balloons just yet, but we're hoping it's the start of a trend," Gale said.

That doesn't mean the city is rewriting next year's budget in black ink. MuniServices predicts at best a 3 percent increase in Modesto's sales tax revenues over the next year and at worst a 1 percent decline, said City Manager Greg Nyhoff.

"There is a point of stabilization and I think we're closer to that, but we're not out of the woods by any means," Nyhoff said. "We budgeted for the pessimistic outlook and we'll likely do that again this year."

Joy Madison, chief executive officer of the Modesto Chamber of Commerce, said consumers will feel more like spending when employment prospects improve. Last month, the county's unemployment rate hit 16.6 percent.

"I think they're feeling more careful about spending, they're putting off purchases," Madison said. "I think there's still a fair amount of uncertainty with what's going to happen in the economy."

Cities will know more about where they stand financially when they see third-quarter sales tax results. Receipts from that period will show whether the federal Cash for Clunkers program, which happened over the summer, boosted revenues, said Marie Lorenzi, a senior accountant with the city of Turlock.

"We're hearing anecdotally from some merchants that some are doing better than expected, but others are doing worse. So until we see the whole picture, it's really difficult to say," Lorenzi said.

Turlock's expectations for Cash for Clunkers receipts aren't what they would be had the program happened last year. Since then, five auto dealerships at Turlock Auto Plaza have closed.

The loss of a dealership is usually a financial blow for a city. Newman's 40 percent dip in sales tax receipts in the second quarter probably can be traced to the closing of Bigelow Chevrolet, said Interim Finance Director Bruce Budman.

The Stanislaus Economic Development & Workforce Alliance hopes its Count On Me campaign will send more shoppers into stores, especially businesses selling local products. With posters placed in the windows of downtown businesses, the Count On Me campaign encourages consumers to "pledge" to spend their dollars on local goods.

The campaign's Web site features a shopping list made up of local products including Sconza candy and Foster Farms chicken. Randy Svedbeck, the Alliance's research manager, said every $1 million spent on local products and businesses creates 11 local jobs.

"Every time they make a purchase, they're helping to keep their own job, save a business or save jobs in the community," said Teri Adams-Jones, communications manager for the Alliance.

See the Count on Me local shopping list at www.countonme.biz.

Bee staff writer Leslie Albrecht can be reached at lalbrecht@modbee.com or 578-2378. Follow her at Twitter.com/BeeReporter.

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