Stores closed=lost sales tax revenueThe Hallmark Store in Rooney Ranch closed. The for-profit Oro Valley Senior Center in the same mall closed. Dick's Sporting Goods in the Oro Valley Marketplace closed. And lets' not forget the long shuttered Radio Shack store in Rooney Ranch. These are destination stores. They draw customers specifically to go to their stores. Other retailers in the area benefit from the traffic flow. Now such destination stores are gone. And with them, the sales tax revenue they directly and indirectly generate.
More store closings to come=future lost sales tax revenues
Mattress Firm has filed for bankruptcy. It plans to close several hundred stores. There four Mattress Firms stores close together in Oro Valley. According to the company, stores that are close together eat their sales of their other stores. Thus, they are closing stores. Certainly, at least 2 of these stores will close.
Oro Valley lives off sales tax revenues
Empty storefronts mean lost sales tax revenue. Sales tax revenues are the town's most significant revenue source. Sales tax revenues are 50% of total Town Of Oro Valley general fund revenues.These funds pay for most of the town's administration cost, for most of the cost of Oro Valley's police, for some public works and parks and recreation costs. A loss of sales tax revenues is a big deal.
We saw what a decrease in sales tax revenues can do to a community that depends on sales tax revenues but is unprepared for the potential consequences of less, and not more revenue.
This is what happened in Oro Valley in 2008-2010.
The town council could not bring themselves to reduce spending to balance the budget, a budget deficiency caused by what was laughingly called a 'depression.' The council was replaced by the voters in 2010.
The spending challenge today is more complex than in 2010
Oro Valley's spending has ballooned to $143 million from $92 million in just 8 years. Spending has far outpaced population growth. Today, online shopping plays a major role in reducing store traffic. People now use "point and click" shopping for purchasing all kinds of merchandise, including groceries. Fortunately for Oro Valley, online sales are taxed and the revenues are supposed to come to the town (information request on this is pending with the town). This use is rapidly accelerating. This was not happening in 2010.
The train of Oro Valley spending has a huge head of steam. And, it's rolling down the tracks.
The potential of decreasing sales tax revenues presents a huge challenge to our council when they face the 2019-2020 budget process, which starts in February.
The council challenge will be to slow the train of spending down a bit; to prepare the town for whatever sales tax revenue scenarios might emerge; and to steer the train of spending in the right direction.
This will be hard to do.
Some of the spending is embedded in the "community center."
Some of the spending is embedded in the way the town operates. Entitlement has crept into Oro Valley's administration with automatic pay increases, free health services, and self-insurance programs. Separate pay negotiations and agreements exist between a major element of town services and the town.
It's complicated.
It will be up to the new council to simplify the complicated.
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