City of San Marcos Sales Tax Update Q22018 Third Quarter Receipts for Second Quarter Sales (April - June 2018) San Marcos SALES TAX BY MAJOR BUSINESS GROUP In Brief $1,400,000 2nd Quarter 2017 $1,200,000 San Marcos’ receipts from April 2nd Quarter 2018 through June were 3.9% below the $1,000,000 second sales period in 2017 though the decline was the result of the State’s transition to a new software $800,000 and reporting system that caused a delay in processing thousands of $600,000 payments statewide. Sizeable local allocations remain outstanding, par- $400,000 ticularly for home furnishings, build- ing materials, service stations and $200,000 casual dining restaurants. Partial- ly offsetting these impacts, the City received an extra department store $0 catch-up payment that had been General Building County Restaurants Business Autos Fuel and Food delayed from last quarter due to the Consumer and and State and and and Service and Goods Construction Pools Hotels Industry Transportation Stations Drugs same software conversion issue. Excluding reporting aberrations, ac- tual sales were up 3.0%. Progress was led by higher re- TOP 25 PRODUCERS ceipts at local service stations. The IN ALPHABETICAL ORDER REVENUE COMPARISON price of gas has been driven high- ABC Supply Co Hughes Water & Four Quarters – Fiscal Year To Date (Q3 to Q2) Sewer er over the past year by simmering Albertsons Hunter Industries global political tension and robust Ashley Furniture 2016-17 2017-18 economic growth that has lifted de- Homestore Jeromes Furniture mand. Best Buy Kohls Point-of-Sale $14,377,888 $14,692,328 The City also received a 12% larg- Biggs Harley KRC Rock Davidson County Pool er allocation from the countywide Landsberg Orora 2,217,780 2,261,825 use tax pool. The pool is divided Costco Marshalls State Pool 8,054 8,444 proportionately among local agen- Economy Restaurant Equipment Modern Builders cies based on point of sales re- Supply Emser Tile Gross Receipts $16,603,722 $16,962,597 ceipts and San Marcos received a Nordstrom Rack Frys Electronics larger share of the pool this quarter Roofing Wholesale with results that outperformed the Holland Motor San Marcos AM PM County average. Homes Home Depot San Marcos Mobil Net of aberrations, taxable sales Hub Construction Walmart for all of San Diego County grew Specialities 0.9% over the comparable time pe- riod; the Southern California region Published by HdL Companies in Fall 2018 was up 1.0%. www.hdlcompanies.com | 888.861.0220 Q2 2018 City of San Marcos Sales Tax Update California Overall initial first round of tariffs on metals, machinery and components. On the SALES PER CAPITA Local Government cash receipts from down side, small retailers without the April through June sales dropped power to lock in prices may be placed at 10.1% from the same quarter one year a competitive disadvantage and contrac- ago due to implementation issues with $4,000 tors are beginning to require escalation CDFTA’s new tax reporting software clauses in contracts to cover potential system. The results were further $3,000 NOTES cost increases on long range projects. skewed by the State’s attempt to offset the resulting shortages by advancing The key concern for analysts project- $2,000 tax revenues that it estimates will be ing 2019-20 tax revenues will be how generated next quarter. the federal government refines its trade $1,000 After reviewing unprocessed returns policies and the impact on sales and use tax revenues. Although higher prices and approximating the full amounts of $0 partial payments, HdL estimates that generate more sales tax from individual Q2 Q2 Q2 Q2 once all returns are properly processed purchases, they also potentially reduce 15 16 17 18 the number of purchases, particularly in and the data adjusted to reflect actual San Marcos County California quarter receipts, statewide local sales an environment where rising housing, and use tax revenues will be 1.6% education and health care costs compete EVENUE Y USINESS ROUP higher than second quarter 2017. for a significant portion of discretionary R B B G income. San Marcos This Quarter Sales of building and construction Building materials, jet fuel and online shop- Proponents of rising tariffs argue that 15% ping appear to have been the primary the rising strength of the U.S. dollar will Cons.Goods Pools drivers of statewide growth during the offset the impact of tariff related price 30% 14% second quarter. Auto sales leveled off increases on consumers. Opponents as previously anticipated, although worry that the stronger dollar and the receipts from auto leases continued announced $5.6 billion in retaliatory Restaurants to show substantial gains. Online tariffs on California exports will neg- 11% fulfillment centers and value themed atively impact both the affected com- Food/Drug Bus./Ind. apparel stores were the primary gainers panies’ job base and capital investment 5% Fuel Autos/Trans. 10% within the general consumer goods in supplies, equipment and expansion 5% 9% group. Business-industrial purchases opportunities. were slightly lower than previous quarters with declines in new energy SAN MARCOS TOP 15 BUSINESS TYPES projects being a major factor. *In thousands of dollars San Marcos County HdL State Regionally, the San Francisco Bay area Business Type Q2 '18* Change Change Change and the Sacramento and San Joaquin Valley areas outperformed the rest of Boats/Motorcycles 103.1 5.7% -10.6% -12.4% the state. Building Materials 306.3 -14.3% -25.3% -23.2% Casual Dining 188.8 -14.0% -9.6% -12.6% Tariff Policies and Sales Tax Contractors 211.4 12.9% -26.5% -10.7% Tariffs are becoming a key element of Department Stores 146.2 46.6% 23.6% 12.7% the federal government’s international Discount Dept Stores — 448.2 CONFIDENTIA -0.5%L — -12.0% -13.5% trade strategy with additional duties Electronics/Appliance Stores 213.4 4.7% -3.1% -5.1% of 10% announced for the end of the Grocery Stores 128.1 2.2% -2.1% -7.0% third quarter, rising to 25% by the end Home Furnishings 169.8 -32.7% -20.2% -21.7% of 2018. Light Industrial/Printers 74.3 -21.2% -31.3% -26.0% Despite the current debates, analysts be- lieve that the impact on prices and sales Plumbing/Electrical Supplies 81.1 18.6% 1.5% -6.7% will be minimal through the remainder Quick-Service Restaurants 168.3 -13.1% -5.2% -5.8% of 2018-19 as most major retailers have Service Stations 187.9 -20.6% -31.9% -26.4% already imported their inventory for the Specialty Stores 84.9 -1.3% 3.9% -4.6% holiday season and are attempting to Trailers/RVs — 157.4 CONFIDENTIA 19.5%L — -41.9% -6.7% rush spring inventories through customs Total All Accounts 3,485.8 -6.2% -12.3% -12.2% ahead of the new 5% rates. Many man- ufacturers have managed to avoid rais- County & State Pool Allocation 570.8 12.2% 4.9% 5.5% ing prices by absorbing the costs of the Gross Receipts 4,056.6 -3.9% -10.3% -10.1%.