Sales taxes are among the largest sources of revenue for cities and counties in the central San Joaquin Valley. But the Great Recession, which spiked unemployment rates and tanked residents' home values, forced many people to cut back on their spending — and took a huge toll on the budgets and public services of many communities.
Slowly but surely, however, those crucial revenues — collected by the state and distributed back to local government agencies — have been on the rise over the past couple of years. Sales tax income has grown in every Valley county and city since the trough of the recession between 2007 and 2010. And some communities have even rebounded to a higher level than they were before the recession struck.
"Sales tax revenue is a great indicator of discretionary income" among the public, said Mike Dozier, director of the Office of Community & Economic Development at California State University, Fresno. "It shows that there's a better feeling or level of confidence in the economy as a whole.
"If communities are above where they were before, that's great news," he added.
Valleywide, cities and counties experienced an average decline of 15% in sales tax income from the state between 2006-07, the pre-recession peak for most areas, and the deepest part of the trough in 2009-10.
But nowhere was the pain felt more sharply, on a percentage basis, than in Selma, a city of about 23,000 people along Highway 99 south of Fresno. The state Board of Equalization reported that Selma received about $3.5 million in revenue from sales and use taxes in 2006-07. By 2009-10, that number had dipped by nearly 40%, to about $2.1 million.
At about one-third of the city's general fund income each year, "sales taxes are traditionally the largest portion of our city budget," Selma City Manager D-B Heusser said. "Of Fresno County's 15 cities, Selma is the third-highest producer of sales taxes, third behind Fresno and Clovis, and we're dependent on sales tax."
In 2012-13, the most recent figures available from the state, Selma received about $2.9 million in sales and use taxes — much better than a few years ago, but still about 15% below where it was before the recession.
"Our finance people predict that we will not be back to where we were until about 2017," Heusser said.
The dramatic impact of the reduced revenue forced the city to make some drastic decisions. "We did furloughs, we did early retirements, and we did layoffs," Heusser said. "We went from 151 employees to under 90 now, so we cut a major portion of our workforce. … Our community development department, which was a cash cow for the city, had 10 people on the staff, and it's only three now."
He added that none of the employees have received raises for years.
About 25 miles to the south, in the Tulare County seat of Visalia, Deputy City Manager Eric Frost is happy to see that sales taxes have not only grown by about 40% from where they bottomed out in 2009-10, they're 16% higher than the pre-recession peak in 2006-07.
"Things have improved substantially," Frost said. "It's 2014, and the peak was December 2006. I feel good about it after seven years of wandering in the desert."
Before the recession, Visalia's peak sales tax revenue was about $16.5 million in 2006-07.
As the wheels fell off the economy over the next couple of years, sales taxes dipped to about $13.7 million. In 2012-13, Visalia received about $19.1 million in payments from the state for sales and use taxes, and Frost said the figures are growing this year as well. "From a budgeter's standpoint, it's much nicer to have a steady increase than a steady decline," he said.
This year, sales taxes are expected to represent about 40% of Visalia's general fund revenue. The growing income "finally allows us to stop cutting services," Frost said.
"The city has been scrambling to figure out how to continue to operate with a smaller and smaller revenue base" since the recession. "At the same time, certain costs that we have to pay have increased over the same period of time."
With sales tax income flush once again, Frost said Visalia's City Council "will have to decide whether it's time to reinstate some things that were cut. … All of this will make this year's budget process very interesting."
Across the Valley, 17 of the 34 cities in Fresno, Madera, Merced, Kings and Tulare counties have recovered beyond where they were before the recession; the other half still have a ways to go.
In communities where sales taxes lag below their earlier peaks, Dozier said there are likely two factors in play: higher unemployment that continues to create a drag on the local economy, "or they haven't kept up with drawing retailers they need for their community."
"A lot of smaller cities don't have the staff to go after and assist businesses coming into town, and retailers weren't in the business of expanding in small towns," Dozier said. "If you take a place like Clovis, you see constant expansion in new areas, and those added retailers will increase the sales tax revenue."
Many smaller cities, he added, lack the population growth or demographics to attract new major retailers. But, he said, even the addition of a convenience store in a small town can still make a significant difference in the annual sales tax revenue.
The reporter can be reached at (559) 441-6319, email@example.com or @tsheehan on Twitter.