Sales tax collections decline for the first time in nearly two years

Oklahoma City sales tax revenue declined 2 percent this month, an abrupt reversal after nearly two years of growth in a primary indicator of local economic activity.

The decline after 22 consecutive months of growth was a surprise to city budget officials, who were expecting moderate growth.

Results could possibly be indicating a slowdown in economic activity and waning consumer confidence.

"The question for us is whether this is the beginning of a downturn or simply an anomaly," said Budget Director Doug Dowler.

Oklahoma City received $35.6 million in sales tax and $5.9 million in use tax last week from the Oklahoma Tax Commission.

Sales tax is the single-largest revenue source for the general fund, the primary account for day-to-day operating expenses.

March sales tax is based on sales the last two weeks of January and first two weeks of February, so there is about a three-week lag in reporting.

Because a quarter-cent sales tax increase took effect Jan. 1, 2018, overall monthly sales tax revenue showed a significant percentage increase over 2017 in each of the past 12 months.

With the reporting lag, March is the first month to provide a direct comparison of local economic activity under the new tax rate. 

Throughout 2018 and into 2019, underlying local economic activity as reflected by sales tax collections remained on the upswing: September 2018, up 5.3 percent; October, up 3.0 percent; November, up 1.1 percent; December, up 4.6 percent; January 2019, up 4.7 percent; February, up 1.65 percent.

Before the latest 22-month winning streak for sales tax, the previous longest period of sustained growth was 26 months, from January 2005 through February 2007.

The city manager presents the proposed 2019-20 budget to the city council April 30, giving budget officials only one more month of data to decide whether the March sales tax results are "the beginning of a trend or an odd month as we prepare for next fiscal year," Dowler said.

He said officials currently project 2 percent growth in sales tax for next fiscal year.