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City faces escalating shortfall in sales tax revenues

Thursday, April 9, 2009 by Austin Monitor

Austin’s sales tax collections fell 14.4 percent in February, continuing a downward trend that has lasted for several months and forced the City Manager to cut costs in the middle of the budget year. The city’s Budget Office had revised its predictions in February as the depth of the national recession became apparent, but the continued decline in revenues is outstripping even those projections.


“We projected sales tax revenue for the entire year to be $15.6 million below budget, or 6 percent below our fiscal year 2008 actual sales tax revenue… the year-to-date revenue decline is greater than the initial 6 percent projection,” Chief Financial Officer Leslie Browder said in a memo distributed Wednesday to the City Manager and members of the City Council. “On a cumulative basis for the first five months of fiscal year 2009, our collections are down 10.1 percent compared to the same five months last year.”


The city has already undergone one politically difficult round of budget cuts in response to the drop in sales tax revenues. Staff is expected to bring forward additional cost-cutting recommendations, along with a revised five-year financial forecast, in a Council work session later this month.


“We are continuing to track the savings generated from vacant positions, holding as many of these positions open as long as possible. As we discussed during the mid-year budget reduction presentation, an assessment of all services and programs for their effectiveness and efficiencies will be required as part of next year’s budget development,” Browder said.


Austin is not alone in struggling with falling sales tax revenues. Dallas experienced an 8 percent drop in February, San Antonio had a 6 percent drop, and Houston had a 2 percent drop. Sales tax revenues are also down for other central Texas taxing entities. Capital Metro’s sales tax revenues dropped by 14.9 percent. Round Rock was down by 1.2 percent and Sunset Valley was down by 11.5 percent. San Marcos, which has a high concentration of retail in the outlet mall along I-35, was the only nearby entity to show a significant increase with a 2.9 percent jump in sales tax revenues.

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