April 24, 2024

Sales tax is up more than 4 percent year to date in Sioux Falls, thanks to strong sales activity in March.

“It’s been kind of an interesting first start to the year,” director of finance Shawn Pritchett said Wednesday as he presented a report to the Sioux Falls City Council.

“We’ve returned to positive territory for the first three months.”

March, which represents February transactions, was “a really strong month,” he said.

Because sales tax revenue came in behind projections last year, it will need to grow 7 percent, which is more than was anticipated this year, for the city to make its proposed budget.

It’s possible the year-over-year trend line could go up as the year goes on, Pritchett said.

“I wouldn’t be surprised if we see some stronger gains … because we’re going to be growing off of lackluster growth in late summer, early fall of last year.”

The entertainment tax was up 9.2 percent in March, driven largely by restaurant revenue, Pritchett said.

“We’re continuing to see strong consumer activity,” he said.

Looking at revenue by industry, grocery continues to show a downward trend, though nearly every other category was up in the most recent data available.

“As you look at those, you can see the most recent month for sales tax revenue is pretty positive growth across the board,” Pritchett said.

The lodging tax is up 5.5 percent year to date, including more than 9 percent growth in February and March, when the city hosted several major events. That tax is tied to the average daily rate hotels charge.

The BID tax, which is a better measure of actual occupancy, fell 11 percent in March but is about flat on a year-over-year basis.

“So you’re seeing a little more softness on the occupancy side compared to where we were last year,” Pritchett said.

Looking at broader market conditions, “inflation continues to be very sticky and stubborn,” he said. “It’s really kind of plateaued in that 3.5 percent.”

While food inflation dropped to 2.2 percent in March, “one of the reasons why you’re seeing inflation be stubborn right now is that energy is back to a positive inflation rate right now after being negative for the last year.”