Sept. 18, 2024

Sales tax revenue in Sioux Falls showed a slight rebound in August but not enough to meet the city’s budgeted increase.

Revenue received in August, which largely represents July sales, was up 3.4 percent and “is the largest growth we’ve seen month over month since March of this year,” director of finance Shawn Pritchett told the Sioux Falls City Council in a report Tuesday.

July sales tax, which represented sales in June, had gone negative on a year-over-year basis, down 3.7 percent.

Year to date, sales tax is up 1.9 percent year over year, compared with 3 percent at the end of last year. The city needs to grow sales tax revenue by 7 percent to meet budget because 2023 fell short of projections.

“It’s very difficult for us to hit the 7 percent we would need to hit our budgeted revenue goal for this year,” Pritchett said. “I’m still hopeful to try to get into at least that 3 percent range for the year.”

The entertainment tax grew 4.9 percent in August, also the highest since March, thanks to “solid and steady growth for restaurants, lodging and bars,” he said.

Year to date, it’s up 4.4 percent, compared with 6.4 percent at the end of last year.

“We are down (from last year) but certainly it has remained a little bit stronger than it has been on the general sales tax side.”

Inflation continued to moderate in August.

At 2.5 percent minus food and energy, “this is the lowest we’ve seen in about 3 1/2 years, or in early 2021,” Pritchett said. “Food cost inflation has remained pretty steady.”

Lodging tax revenue was up 6.2 percent in August, continuing how the city has been “overall seeing some solid gains in the last three or four months,” Pritchett said, adding it’s likely driven by price increases rather than occupancy, which has been steady or down slightly.

A closer look at business activity in various sectors reveals several trends.

Manufacturing was down 19 percent, the 11th consecutive month it has been lower. Wholesale trade and durable goods are down 5 percent for the fourth month in a row. Lumber is down 4 percent for the 10th time in a row.

Furniture is down for the ninth time in 12 months. Miscellaneous retail is down 24 percent, which had been a stronger sector.

On the positive side, utilities were up 129 percent in the past month. Department stores were up 4 percent, which has been “a really steady and stable industry for us,” Pritchett said.

Grocery revenue was up 9 percent after being down eight times in the past year, while restaurants were up 5 percent, and remote retail continued to be strong at 11 percent.

“We’ve seen reduced growth coming off the post-pandemic surge,” Pritchett said. “Not surprising, these are supporting industries that can be sensitive to interest rate fluctuations.”