$438,000 sales tax estimated Town loss
Despite a few technical glitches, Farragut’s Board of Mayor and Aldermen met for the first time electronically Thursday, April 9, to discuss what is to be an estimated $438,000 sales tax hit for the Town in the current fiscal year due to COVID-19 related shutdowns.
However, based on several factors — including already conservative budgeting, the Hall Tax and building permits — the impact is expected to be much less that what many other tax-reliant entities may be currently facing, officials said.
“A lot of things went on the last two-to-three weeks, since we last met on March 12, to discuss next year’s budget,” Town Administrator David Smoak noted as he led the group through a budget work session prior to the regularly-scheduled Board meeting. “We had some general ideas, where we thought things were going to go, but with COVID-19 infecting the whole world, we’ve had to really go back and look at our revenues and expenses for the next year.
“Most businesses have been shut down, and are for the near future. We don’t know what that’s going to look like coming back,” he added. “We know our grocery stores are still doing well. But, we took March, April, and May — looking at when our retail sector will be likely shut down for most part. Our grocery store sales will be solid — we have a baseline from that but added about 25 percent of what we would normally get.
“Then in June, hoping things would start coming back a little better, we anticipated half our revenue might come back. In our original budget, we estimated $6.3 million in sales tax; right now, we are estimating $5.926 million — about $438,000 less dollars in sales tax for this fiscal year. Then, next year, a flat budget (with the) same amount.”
Smoak also referenced a report from the Bureau of Economic Research at the University of Tennessee, predicting possible projections for cities and towns in the coming year.
“They estimated a pretty big hit for this quarter we are in, but then (they) are thinking revenues for most cities would be flat,” he said. “Their predictions is that we will curve out of this, and the curve will be shorter lived.
“So, $5.9 million for this year and next year,” Smoak added. “If we do that, a couple of things: we are being very conservative, but if the economy gets better and see things being much better, five months into next year we will maybe be able to look at things we have had to cut and revisit that.
“But I think this will get us through the short term, the next nine-to-12 months, where we will be able to keep our services, where they are at, without having to cut in too many areas.”
Smoak also reported an unexpected revenue, which was “$990,877 from the Hall Tax — around $590,000 more than we anticipated,” he said about that tax, which will end after the 2021 fiscal year.
He also reported building permits have been strong, with “a lot of the housing developments, keeping on going, at least for now.”
Smoak added that he had asked department heads to see where they could cut back over the next year as the budget is continuing to be evaluated.
The group is scheduled to meet again in a budget work session prior to the April 23 BOMA meeting.
