(The Center Square) – The city of Tumwater had the largest increase in sales tax revenue last year among Washington municipalities, according to a new report from the Office of the Washington State Auditor.
Tumwater’s sales tax collection was more than $3 million more than the year before, increasing from $10.8 million to $13.9 million; a 28.5% increase.
“Higher sales tax receipts are a good indication of economic growth,” University of Central Arkansas economist Jeremy Horpedahl said.
There are some exceptions to that, however, including the federal government’s large “injection of cash to consumers outside of economic growth,” Horpedahl said.
Overall sales tax collection in Washington was down 4.5% last year, for a $76.7 million decline. However, the auditor’s office reported “167 of 272 cities (that's over 60%) saw an increase in their sales tax collections over pre-pandemic 2019."
“We think each city has its own story that explains the increase or decrease," the report said. "We shouldn’t assume any one factor is responsible for changes.”
Tumwater’s long-serving Mayor Pete Kmet believes construction helped drive the bump in sales tax revenue.
“We have had a significant increase in construction activity, especially single-family housing, with more than double the number of housing units being built per year over the last couple of years," Kmet said. "One-time construction sales tax and related furnishings are up significantly as a consequence.”
Kmet said that although such things are “difficult to quantify, we also believe we have benefited from strong online sales and destination-based sales taxes.”
Then there is the government presence, with the city’s close proximity to Olympia.
“We have a strong State employee base in our community, with several State agencies located in Tumwater," Kmet said. "With many State employees living and working (and spending) in Tumwater, this tends to stabilize large ups and downs in our economy. The pandemic also appears to have driven a number of one-time state agency purchases for goods and services related to the pandemic.
“Federal funding has definitely helped bridge the uncertainty and initial revenue loss caused by the pandemic,” he said.
Kmet pointed out that sales tax receipts are not the whole story of tax collection in Tumwater.
“We are still planning for and seeing about a 5 to 7% drop in overall revenue as a result of the pandemic,” he said, and thus the Tumwater city government is “being careful to control expenditures and gradually ramp back up services as revenue improves.”