While Winona shut down, sales tax kept pouring in


(7/29/2020)

by CHRIS ROGERS

 

How badly has the pandemic hurt the local economy? Numerous local business owners say sales have plummeted and they are fighting to stay afloat. Many workers are laid off, and Winona County’s unemployment rate topped seven percent in May. But another piece of data — local sales tax revenues — suggest that at least some parts of the local economy are holding up just fine. How can that be?

Starting in 2017, the Winona County Board enacted a half-cent-on-every-dollar sales tax to fund transportation projects. It has proven both a valuable source of road-repair funding and a useful weathervane for the local economy, giving up-to-date information on the amount of taxable sales in the county from month to month.

Curiously, while hundreds of businesses were closing their doors in March and April and local college students were leaving town, county sales tax revenues dipped only slightly. Compared to the two-year average for each month, sales taxes were five percentage points below average in March, only one percent below average in April, and less than three percent below average in May. It’s not exactly the catastrophic drop one might expect.

“You’d think you’d see this big dip in sales tax, but we just haven’t seen it yet,” Winona County Administrator Ken Fritz said. “A little bit, but nothing huge, which is kind of interesting,” he added.

Why is that? Part of the answer may be that some sectors are doing well even as others struggle. Winona County sales tax data doesn’t include a breakdown by industry, but statewide data does. There, it is clear that while strong demand in some sectors buoyed overall sales, other sectors were hard hit.

Across all Minnesota industries, sales tax revenues in April were 6.7-percent below the three-year average and 3.8-percent below average in May — a more pronounced drop than in Winona County, but still nothing huge. Statewide sales in the retail sector, which includes big box stores, were actually 15-percent above average in April. Meanwhile, the hospitality sector, including hotels and restaurants fell to 61-percent below average.

“People were staying home and shopping,” Winona Port Authority Commission President Mike Cichanowski said. Other local officials suggested panic buying early on in the pandemic might have contributed to the above-average retail sales. Notably, grocery sales aren’t taxable, but cleaning supplies are. “Everybody was out buying every roll of toilet paper they could find and cleaning supplies and stocking up,” Winona City Manager Steve Sarvi said. “I was actually concerned that after that buying spree in March and April things would drop off considerably … but that doesn’t seem to be happening,” he added.

Some goods and services have been in high demand because of the pandemic, Winona Area Chamber of Commerce President Christie Ransom noted. “As people were home under the shelter-in-place order, we saw more people focusing on home-improvement projects and major landscaping projects, which likely wouldn’t have happened if people weren’t home looking for things to do — at least not to the same capacity,” Ransom stated, adding that tackling a big home-improvement project often gets people to spend more than they would in an average month.

Winonans making a point to support local businesses played an important role, Ransom argued. “Shopping local makes all the difference!” she stated.

Another sector that might have helped keep sales taxes up is construction. “I think it helped that we still had a lot of construction going on in Winona, and that didn’t stop,” Winona Finance Director Mary Burrichter said. Building materials are taxable, and from Main Square Development to the new YMCA building, many construction sites were going full bore even while other workplaces slowed down.

The steady sales could also be a sign that federal stimulus and aid programs did what they were supposed to and kept the economy from tanking, others suggested. Across the U.S., many Americans received $1,200 stimulus checks and qualified for an extra $600 a week in unemployment payments. Fritz believes Winona County saw evidence of these aid programs’ effects elsewhere. Normally, in an economic downturn, the county would see requests for food stamps and welfare rise significantly, he explained. “We’ve seen activity, but it really hasn’t been much,” Fritz said. “It’s kind of strange. I think all of us believe that it’s because the government pumped a lot of money into the unemployment system and the stay on evictions.”

So maybe all that federal money encouraged people to keep spending. “But that’s going to change,” Fritz pointed out. The $1,200 checks were a one-time deal, and unless Congress passes something to replace them, the extra unemployment benefits are going to expire at the end of this month. Plus, a state moratorium on evictions is set to end in mid-August, meaning that many households could face balloon rent or mortgage payments or even lose their housing. In debates over how local government should spend its coronavirus aid, Winona County Board member Marie Kovecsi argued the county should be prepared for a potential increase in poverty when those stimulus programs end.

Chris@winonapost.com

 

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