At this point, you know about the $20 million adjustment to the anticipated revenue from the Capital Project Sales Tax, along with the possibility that up to 10 projects will go unfunded.
Behind that number is another surprising reality. If the county expects to collect $20 million less than initially forecast from a 1% levy on sales, that means officials now think they might have overprojected sales eligible for the penny tax by $2 billion.
Yes, billion. With a “b.”
That’s a 10-figure miscalculation.
How did the county get there?
That’s a good question, one we’ve been trying to get officials to answer. We can, however, make our own projections with some of the data we have.
We know that for the first year of the tax, the county collected $8.44 million. For the second year, it raised $9.07 million — a 7.5% increase over the first year.
If the county saw that much gain each year, the tax would sunset days ahead of the end of Year 8 because the county would raise the $87.9 million.
That estimate might be lofty. Changes in sales tax revenue year to year change based off inflation, wage gains, population growth and changes in employment levels. Because inflation is a constant and we’ve consistently seen population growth in Greenwood County — if we had more housing, we’d likely see it grow faster — annual increases in sales tax revenue should be a near constant. Recessions do happen, however, and people can change their buying habits, so there are factors that can slow growth or even cause a slight decline during a year or two of the eight-year span.
Getting into all of those factors is something far more complex than I tackle in this column, in part because I have to understand the numbers too. The state Revenue and Fiscal Affairs Office, however, has a rate it used for estimating annual growth in sales tax revenue for a possible Greenwood local options sales tax that we can apply here: 4.2%.
That number is more modest than the 7.5% rate, perhaps because the office cautions governments to use more conservative figures, and seems roughly in line with the combined effects of inflation and population growth.
If we use that lower growth rate, the county ends up with an $80.54 million total haul. That’s more than $7 million short of the goal, but would still fund most of the projects and be well ahead of that $67.9 million figure.
Let’s go more modest. Average inflation for the 12 months ending in July was 1.8%. That is a barebones rate that would discount any population growth or new industry. Using that rate of annual revenue growth across the next six years gives a final tally of $75.49 million. This is a very conservative estimate but is still nearly $8 million higher than the county’s new estimate.
Dropping it to a no-growth calculation, meaning the county would collect the Year 2 revenues in all future years and not one penny more, would give a figure of not quite $72 million. To hit that tally, we’d need to see enough population decline, job losses and lost wages to counteract inflation across six years. That seems improbable, but it’s still about $4 million above the county’s new estimate.
To hit that new figure, the county would need to experience an annual decline of roughly 2.2% each year.
The new projection, then, either anticipates a prolonged, six-year recession or some massive blow to the local economy in that span. How massive of a blow? If sales tax revenue dropped 11.5% this year, then stayed consistent with inflation, we’d hit that new projection.
In other words, either the new county projection is bogus and informing “stakeholders” of a possible $20 million shortfall was premature or officials see a reason to panic and have not been inclined to share their concerns with the public.
Josh Skinner, capital projects coordinator for the county, said in an email to staff writer Adam Benson that neither is the case. In the same email, Skinner said it would be unrealistic for the county to assume tax revenues wouldn’t grow.
If that all adds up to you, let me know. I’ll give you a penny for your thoughts.