Sales Taxes

What could be more interesting? Actually it is pretty interesting. The City of Shafter has been pursuing businesses with the idea of growing their sales tax revenue for a number of years. Not unusual, I am sure. What is unusual is how successful they have been, especially last year. In the fiscal year ending June 30, 2007, the City more than doubled it's sales tax revenue from $3.1 million to $6.4 million. This was without raising the rate. Before that, sales tax revenue had been growing, but much more modestly.  It was at $1.8 million in 2004, $2.1 in 2005, and $3.1 in 2006.  To put this further in perspective, the City's total budget last year was less than $10 million, so nearly 70% of expenditures were covered by sales taxes. By comparison, Bakersfield takes in sales tax revenue that is consistently around 45% of expenditures, covering the rest through property taxes, gas and water fees, etc. This growth is expected to pause this year with sales taxes budgeted at just over $5 million due to slowing economic conditions. The downturn is accentuated by the fact that quite a few Shafter businesses are tied directly to construction.  Still, Shafter is doing pretty well. 

The big push in 2007 seems to have been driven by several number of new openings and expansions. Performance Food Group built and occupied a building near the airport, Scotts Fertilizer opened a new facility employing 30 people, both Bethlehem and Precast Concrete expanded their operations. Formica opened a warehouse operation near 7th Standard employing 20 people. The Target distribution center, which opened in 2002, continued to grow, reaching 800 employees in 2007.  (Note- I don't think that the Target distribution center actually generates sales taxes, though I could be mistaken.)

Taxable sales from these companies were all to other businesses and almost all of them to customers outside of Shafter. The demographics right now simply don't support much of a consumer driven economy.  Moreover, even Shafter's middle class, small as it is, mostly shops for groceries, home improvement supplies, and just about everything else in Bakersfield.  This makes the recent achievements all the more impressive and provides the backdrop to the growth of Bakersfield toward the edge of Shafter and the widening of 7th Standard, which could prove a windfall (the good kind, not like finding a hand) for Shafter.  Retail follows traffic and disposable income.  If current trends continue, 7th Standard will have both in spades.  Retail development on the northern side of 7th Standard would allow the City of Shafter to collect retail sales taxes with minimal infrastructure construction and maintenance.  Not only would the retail taxes from the Shafter middle class stay in the city, but the shopping of Northern Bakersfieldians would also be contributing to the coffers of Shafter.   

What's wild is that the City is already flush.  At the last reporting, Shafter had $25.9 million in unreserved cash.  That's right.  The City of Shafter could operate as it does now for nearly three years with no revenue.  Bakersfield, whose budget is 15 times as large had an unreserved balance of $35.8 million.