Economic impact of coronavirus on New Albany may not be as bad as first feared

The coronavirus is hurting communities economically all across the country but New Albany may be better off than some.

It’s still too early to tell how much, but the city will see reduced retail sales tax and tourism tax revenue, however. Those are two of the city’s main sources of income.

It could be worse, though, according to Mayor Tim Kent.

“We get better sales tax and tourism tax than any town our size,” he said.

Kent said he has frozen discretionary spending to save money, and another positive point is that he doesn’t see any need to furlough city employees.

“We’ve frozen everything except what we need for day-to-day operation,” he said, adding things like new vehicles will have to wait until this crisis is over.

The effect on tourism tax

The city budget is still feeling the effects of the pandemic, nonetheless.

It’s particularly true with tourism tax.

The city collects a two-percent tourism tax on accommodations and food that is prepared on site. All that money comes back to the city but it is in a separate budget from the general budget. It is only supposed to be used for activities that promote tourism or the area as a retirement community.

Mayor Kent said he talked with several restaurant managers shortly after the shelter in place order came down and it appeared that those still open were managing to do about 50 percent of their former business through curbside sales.

However, Kent said Monday that now, several weeks later, people apparently are getting used to the idea of curbside pickup and restaurant sales have improved.

“Most of them say they are now doing about 75 percent (of what they do normally),” he said. One restaurant is seeing only a 15-percent decrease in sales.

Drive-up customers at El Agave Mexican Restaurant

“Some restaurants are even talking about switching (to curbside only) full time,” he said, although it is not clear how serious that consideration is. Curbside service would certainly reduce expenses.

Retail sales tax loss

Then there’s retail sales tax, which accounts for more than half the city’s revenue.

The city collects seven percent tax on all sales, including items tourism tax is charged on as well. It is sent to the state and the state returns 18.5 percent of that money back to the city.

Of course grocery and household goods sales have been up as people stay at home and even hoard items, but that may be offset once the pandemic is over.

On the other hand, smaller retail businesses were seeing reduced sales or closing entirely. Officials fear that some will not survive but the governor’s new order Friday will help some, the mayor said.

It allows retail businesses to open back up if they follow precautionary practices and limit occupancy inside their businesses to less than 50 percent of capacity.

“It think they are picking up now,” the mayor said. “I’m glad to see it and hope people will support our local businesses because that is what we depend on.”

How much we could lose in tax dollars

New Albany budgeted $3,779,822 for sales tax revenue and $875,927 for tourism tax revenue for the current year.

Although it’s purely speculative, if one assumes tourism tax would be only half the average amount for February through May over the past three years, that would be a loss of about $148,000 or about 17 percent of the total for the year.

Assuming only 50 percent of the usual retail sales tax for the same period, that loss would be about $580,000 or 15 percent of the year total.

Fire department Rescue One. Acting Chief Mark Whiteside said fire and medical calls have been down during the shelter in place time.

Possibly some good news

It’s too soon to tell whether a 50-percent estimate is optimistic or pessimistic but the mayor said Monday indications were that the case for New Albany might not be that bad – perhaps only about a seven-percent loss.

Kent said another positive indication is that the governor said the tax income reported for the state in April (for two months previous) was 85 percent of usual. They were expecting it to be lower.

Some businesses such as salons and tattoo parlors, theatres, museums and places of amusement are still ordered to remain closed and Kent said he is catching some heat for the governor’s decree. “They just haven’t figured out a way to safely deal with that person-to-person contact,” he said of the salons and parlors.

Tax reimbursements to cities run a couple of months behind collections, so it will take a little longer to learn the full economic impact. Taxes collected by merchants in February are reported to the state and public in March but not reimbursed to cities until April, so there is a lag time.

One could argue the city budget has little or no fat in it but there are cuts that could be made, if necessary.

Tourism money goes for some things that are non-essential, but that people have gotten used to, and expect, such as festivals, economic development, cultural programs and even some charitable activities.

Even with delaying some purchases and programs, a loss of $730,000, or even half that, would be a challenge to overcome.

Fortunately, Mayor Kent said, this is a time of year when tax revenue is not as high as others anyway. That means the loss would be greater later in the year. Officials can only hope the losses don’t continue.

The city lists about $670,000 in surplus other funds in the revenue budget but any reserves will be hard to replace if used.

Emergency responders work an accident on Hwy. 15.

We will know more in a few weeks

The city should have a better idea of the real effect on taxes in the next few weeks and month but officials will still have to balance economic need with public and personal safety as far as closings are concerned.

County government is luckier than the city, only in that it does not receive or depend on retail sales tax. Its money comes from property taxes and various fees. However, with people losing income they may be less able to pay those taxes or other fees.

The county’s smaller towns do rely on sales tax, however, and even a relatively small loss makes more difference when the overall total is small as well.

New Albany’s retail sales tax from July 1 to date is $2,584,283.

Myrtle’s is only $37,441 and Blue Springs is even less at $19,143.

The governor’s current safer-at-home order expires in two weeks and may or may not change between now and then. People are still urged to stay at home, wear masks, avoid groups and practice social distancing. Although retail businesses may open, restaurants are still restricted to drive-though or curbside service.