Recent public criticism of continued taxpayer handouts to the Lake Area Improvement Corporation appears to have provoked a reaction from our economic development chiefs. LAIC board member Mike McDowell takes to his Heartland Consumer Power District blog to point to some good news about Madison sales tax revenues. McDowell acknowledges the economic stagnation Madison has experienced during the Forward Madison economic development campaign, but he notes that so far this year, Madison's monthly sales tax revenues are showing significant improvement over last year:
| Municipal Tax Due for Returns Filed January to May 2011 and 2010 (source: SD Dept. Revenue, via Mike McDowell, HCPD) | |||
| 2011 | 2010 | % Change | |
| January | $232,599.59 | $225,144.36 | 3.31 |
| February | $186,459.76 | $185,285.13 | 0.63 |
| March | $200,094.38 | $190,570.30 | 5.00 |
| April | $210,179.14 | $197,562.82 | 6.39 |
| May | $235,208.61 | $203,926.27 | 15.34 |
| June | $220,677.75 | $213,125.95 | 3.54 |
| Total | $1,066,552.48 | $1,004,498.88 | 5.72 |
I knew it! The LAIC was just teasing us, waiting until the last year of Forward Madison to make anything happen for maximum positive publicity.
Of course, as an economic development expert, Mr. McDowell and his fellow LAIC board members know that even monthly local comparisons may miss broader trends. So let's broaden the scope of our economic research, look at total yearly taxable sales in Madison since 2006, and compare those figures with taxable sales statewide and in Brookings.
| Taxable Sales for South Dakota, Madison, and Brookings, 2006&ndash2010 (source: SD Dept. Revenue) | |||
| South Dakota | Madison | Brookings | |
| 2006 | $14,740,340,098 | $118,599,047 | $430,153,281 |
| 2007 | $15,630,141,283 | $125,750,735 | $492,059,360 |
| 2008 | $16,676,135,840 | $148,626,229 | $488,733,669 |
| 2009 | $16,099,652,998 | $138,138,456 | $464,983,175 |
| 2010 | $17,116,226,063 | $133,187,691 | $489,616,474 |
| 4-yr chg | 16.1% | 12.3% | 13.8% |
Armchair economists, start your engines!
Since the beginning of the LAIC's investment of $1.2 million taxpayer dollars in the Forward Madison development campaign, Madison's taxable sales have increased 12.3%. Meanwhile, in LAIC exec Dwaine Chapel's homebase of Brookings, taxable sales rose 13.8%. Across South Dakota, taxable sales increased 16.1%.
Now it's hard to say what caused any of the changes in the numbers above. The sun has risen several times during the Forward Madison program, but I still can't quite nail down the causal connection. Madison's taxable sales experienced a remarkable 18% jump in 2008, followed by a 7% drop in 2009, but I can't tie either bump to specific action by the LAIC. (My running theory on the 2008 peak: Bill Clinton. He must have bought a lot of burgers on his campaign stop!)
The numbers only tell us this: whatever we did with our local investment in economic development, Madison still didn't perform as well in boosting taxable sales as Brookings or South Dakota as a whole.
That said, I'm grateful for Mr. McDowell's effort to blog local economic data. I hope more LAIC board members will take the time to read, publicize, and discuss hard economic data that tell us exactly what's happening in Madison, exactly what we've gotten for our economic development efforts, and what new ideas we might need to pursue to get the return on investment other communities and the state as a whole are enjoying.
Cory, maybe we are doing better in Madison than we thought. Brookings has around 5 times the population of Madison yet taxable sales in Brookings are less than 4 times Madison's total.
Careful, Mike: It sounds like you're doing LAIC-style math. The 2010 Census provides the following population numbers:
—Brookings: 22,056
—Madison: 6,474
—Brk/Mad: 3.41
—Brookings County: 31,965
—Lake County: 11,200
—BrkCo/LakCo: 2.85
I misread the census for Brookings County as Brookings...oops
I think ONE PERSON can make a huge impact locally.
When does the Custom Touch sales arrangement start? Why such an increase in May? Is that an unusual event not part of a trend? When did we have that noisy concert? Wasn't that supposed to increase revenue?
I would like to know how much of this is tied to inflation and gas prices. Remember, gas prices spiked in 2008 to almost 4 dollars a gallon, much like they did this year. This cost of goods and services rose, which in turn means more sales tax paid. In 2009-2010 we saw gas prices and consumer prices ease, which means more product for less dollars and less sales tax collected.
I don't have any figures in front of me right not to make that a firm correlation... but I am thinking that gas prices are effecting this.
But if sales are truly up in Madison... looks like it would be a great time for new retailers to setup shop and capitalize on the growing sales.
Doing some rough comparison of some different sources, you can almost tie each months sales performance to the current gas prices -- surging up or down in sync with the pump. The rest is almost a wash. If we took out the inflation costs (not just product price, but changes in sizing of products, etc.) I think you would see that the sales totals are basically flat of growth and slightly lagging behind the state's growth.
After all, the price of a Taco at our local Taco making establishment has gone up 20 cents a taco in the last five years. Yes, I love tacos. ;)
Here is your chart for gas...
http://www.SouthDakotaGasPrices.com/retail_price_chart.aspx?city1=SouthDakota&city2=&city3=&crude=n&tme=48&units=us
After looking at a few more things tonight, there is one thing we can say for sure. At least people are putting gas in their cars before driving to Sioux Falls to shop.
At first I thought you meant the higher priced gas kept people in town to buy, until realized the higher priced gas may have increased the sale total. But the data they provide by county and SIC show gasoline sales in millions. They stayed basically flat until June. They were Jan: 1.9M, Feb: 1.9M, March: 1.9M, April: 1.9M, May: 1.8M, and then June a big jump to 2.4M. This doesn't correspond with the change in sales tax revenue. Why didn't the revenue from gas go way up in April and May with the price? Can’t explain it.
I think gas prices statewide caused food prices and other retail prices to go up, thus causing higher prices for those goods, thus causing more sales tax. Since businesses pay lots in extra transportation costs, they pass it on to us by raising prices on goods and services.
I am not really counting the amount of gas we sold as adding to it. I do not think people were buying more gas, but perhaps less. I was kind of being sarcastic and trying to say that everyone is going to Sioux Falls to shop still -- but are maybe buying gas before they leave town. I really don't think retail activity is up in town, it think most of the increases are from product price increases.. on things like Tacos, Bread, and Milk. ($4 bucks a gallon for the tasty Land O Lakes stuff -- it used to be $3 bucks a gallon not too long ago).
I don't have an explanation for that huge increase in May, except for maybe the new Custom Touch sales tax deal that we have in place. I can't remember if that is already in effect or not. If we they sold a bunch of houses and started remitting sales tax for Madison in May, then I can see that big increase.
From Amazing Madison:
"The resolution also states that the city will rebate half of the new sales tax revenue paid by Custom Touch back to them, through the Lake Area Improvement Corporation, for a total of ten years or up to a sum of one-million dollars. The sales tax rebate is contingent on Custom Touch hiring 50 new full-time positions within three years and maintaining those positions during the duration of the Sales Tax Rebate agreement. "
I don't know if this started in May or not. If so, cut that number in half because we signed a deal that gives half of that sales tax revenue right back to Custom Touch. We will see if it generates the economic growth that is promised by the City and the LAIC.
I would like to hear other people's thoughts on why the sales tax has increased this year -- and hopefully contemplate the correlation of gas prices to total sales figures for the state.
Sales tax revenue growth may be tied to inflationary pressure on groceries, which indirectly increases sales tax dollars. Most likely, the revenue boost is the result of the sales tax agreement with Custom Touch Homes in which sales tax that was previously collected at the final location of the new home, is now collected in Madison with a split between the City and Custom Touch as a rebate. Actually, the Custom Touch rebate plan could mask a continued sales tax flatline, but I'm hoping this is all great welcome financial news for Madison. Two words..."Fulfillment Center" that handles rebates for companies, handles payments for companies, etc. Two more words that Cory hates to hear..."Call Center". We need to market our citizen's midwest phone skills and work ethic.
Those pesky revenue agents in Pierre may have a little to do with the increase in sales tax: there are a few dedicated agents that do "discovery". That means they search the internet for signs of business activity and they then make sure that each and every person offering products and services for to the public has a valid sales tax license. Let say you mow the neighbor's lawn throughout the summer or you blow out the neighbor's driveway every time it snows and they pay you for your service. By law, you should have a sales tax license.