Slow sales could hinder tax revenue

Sales tax revenue in Newport Beach is down about 20% from the same time last year, city officials said Friday.

The sluggish sales tax figures could mean a loss of about $4 million in tax revenue for the city this fiscal year if the trend continues, said Newport Beach administrative services director Dennis Danner.

“It’s too soon to tell” how the sluggish sales tax figures will affect services in Newport Beach, City Manager Homer Bludau said.

The City Council is likely to discuss the issue in January at its annual retreat, he said.

Bludau has asked city departments to develop 2% to 4% budget reduction plans in case sales tax figures continue to lag behind last year’s figures, Danner said.

Last spring, the city projected sales taxes revenues to grow by 2% this fiscal year — from $22,877,127 to $23,334,670. If the current trend continues, the city could be looking at only about $18 million in sales tax revenue this fiscal year, Danner said.

Sluggish retail, restaurant and automobile sales account for the sales tax slump, said Newport Beach Councilman Keith Curry, who chairs the city’s finance committee.

The good news is, Newport Beach is less dependent on sales taxes as a source of revenue than other cites, Curry said.

“This has less of an effect on Newport Beach than other cities that are really driven by an auto mall or something like that,” Curry said. “We’re prudently monitoring our expenditures to keep our city fiscally healthy — and we have very strong reserves.”

Sales taxes account for about 15% of total revenue in the city’s general fund, Danner said.

That percentage represents a much smaller portion of total revenue than in other cities, Curry said.

“The fact is, we are less dependent on sales taxes than other jurisdictions so the situation is going to be less severe than in other cities,” he said.

Property and hotel taxes are bright spots in the city’s finances this fiscal year.

Newport Beach originally budgeted for about $54 million in property taxes for the current fiscal year, but revenues have exceeded expectations, Danner said. The city could expect to take in more than $56 million if that trend continues he said. Taxes on hotel rooms are also on target for the year, Danner said. The city expects to see about $11.6 million in hotel taxes this fiscal year, he said.

BRIANNA BAILEY may be reached at (714) 966-4625 or at [email protected].