League City could suffer a $660,000 budget shortfall this year because of lost sales tax revenue due to the economic shutdown in response to the COVID-19 pandemic.
Community Impact Newspaper reports that the city’s sales tax revenue is expected to begin decreasing in March, which will lead to a budget gap for the 2019-20 fiscal year.
“Given that the first cases of COVID-19 were reporting in Texas in March 2020, disruption will start in the city’s May collections,” League City Budget and Project Management Director Angie Steelman said in a memo. “The June collections, which are for April sales, will be the first full month reflecting the effect of businesses’ reduction and change in operations.”
City staff has come up with two possible scenarios regarding the impact the coronavirus could have on sales tax revenue.
The first would involve League City experiencing a 10% maximum monthly loss compared to the budgeted sales tax revenue. This would mean the city would collect $20.21 million in sales tax revenue or $254,000 less than the budgeted amount of $20.47 million for the fiscal year running from October 2019 to September 2020.
In the second scenario, the city would have a 15% maximum monthly loss, which equates to collecting $19.81 million or $662,000 less than the budgeted goal.
Steelman said it was too early to know what exactly will happen.
“Looking ahead, it is difficult to say for certain how this pandemic will impact our sales tax revenue, given there is no precedent,” Steelman said. “Staff does not have data to show the consumer spending patterns in this new normal and how that would affect sales tax.”
Sales taxes is League City’s second largest source of revenue. According to the Texas Tribune, Gov. Greg Abbott is devising a plan to reopen the state's economy. He has already issued an executive order allowing non essential retailers to reopen if they can offer the options of pickup or delivery. Restaurants are currently offering those options as dine-in service is suspended.
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