Mitchell's sales tax numbers stabilizing through pandemic
Considering how 2020 has unfolded so far this year, Mitchell finds itself in decent position regarding its tax figures.
Through June, Mitchell was down 1.25% for municipal tax collected over the first six months of 2020 compared to 2019, bringing in $5.72 million in tax revenue. The first half of 2019 brought in $5.8 million, according to South Dakota Department of Revenue figures.
Mark Vaux, executive director of the Mitchell Area Chamber of Commerce and the Mitchell Area Development Corporation, said this week that he expected Mitchell to be in a far worse position regarding tax revenues, considering the widespread impact COVID-19 has had.
“We were expecting to be worse, absolutely, and we’re very encouraged by that number,” Vaux said.
City Administrator Stephanie Ellwein said since that report, July was a good month for Mitchell’s sales tax reports, as the city has rebounded from the declines in the heat of the pandemic. Mitchell had a 9.59% decrease in municipal tax collections in May compared to the same month in 2019, according to the Department of Revenue’s tax reports. That followed the nearly month-long shutdown of some businesses in Mitchell during April, which primarily affected bars, restaurants and recreational facilities.
According to Ellwein’s recent update, the city’s 2% sales tax, which is the first- and second-penny tax, closed the gap in June and July, bringing the decrease to 0.7% compared to the same time span a year ago.
“When you look at the city shutdown and the loss of major events this summer that bring in a lot of revenue for the city, such as the rodeo and Dakotafest, we are sitting in a much better place than I anticipated us to be at this time,” Ellwein said.
Despite the gains the city has made in the first- and second-penny sales tax in June and July, the third-penny entertainment tax, sometimes referred to as "bed, board and booze" tax, has taken the largest hit, which has decreased by about 10% compared to where it was at this time last year. That entertainment tax applies to prepared food, alcohol, ticket sales and lodging.
According to Ellwein, 73% of the city’s overall tax revenue comes from sales tax, which helps fund city services and operational costs.
She said the divide between small-town revenues and Mitchell shows the type of economic impact the city has for the area as a regional hub.
“If you compare the sales tax that we collect annually, we command a bigger share because we know we are drawing in from other areas around us,” Ellwein said, noting that roughly 50% of the total revenue generated from retail sales in the city comes from people living within 30 to 120 miles outside of Mitchell. “That’s why it is so important we do everything we can to support those industry clusters in our community that keep our regional footprint strong.”
Vaux said it’s a regional tradeoff that is worth making right now.
“We’re losing out on that, but that’s strengthening our region and keeping some of that money in those small towns and that’s a good thing,” he said.
Mitchell’s like-sized peer cities around the state were on a similar plane. Mitchell, Brookings, Watertown, Yankton, Huron and Vermillion all had marginal decreases between 0 and 3 percent in the first half of the year in municipal tax. Rapid City and Sioux Falls were down by 0.35 and 1.35 percent, respectively. Aberdeen was the outlier, with a percentage increase of 12.58.
Among South Dakota’s 17 first-class communities, the cities in population between 5,000 and 10,000 people were in the municipal tax sweet spot. Tea saw the largest increase, a 35.8% jump in the first half of the year, with Harrisburg up by 20%, and Box Elder and Belle Fourche showing increases of 13% and 10%, respectively.