Small signs of economic recovery popped up in Covington in January.
January sales brought in more than $228,000 in sales tax, according to data provided by the city of Covington, which was a 16.5 percent increase compared to January 201l. Those numbers, however, are part of a larger five-year trend that Covington Finance Director Rob Henderson observed.
“Rather than just look at January 2012, let’s go all the way back to 2007,” Hendrickson wrote in an email interview. “That year was consistently ahead of 2006 every month. In fact the city received $352,000 more in sales tax revenue in 2007 than 2006.”
And 2008 was better, Hendrickson wrote, as $451,000 more came in relative to 2007.
“On the surface that looks really good,” Hendrickson wrote. “But, when you analyze the underlying numbers, what jumps out is that construction sales tax was driving the large increases.”
While retail went up by nearly 14 percent in 2007 and 4.1 percent in 2008, revenue from construction increased by $356,000 from 2007 to 2008, a 98.3 percent jump.
“If you were to straight line the numbers it looked like the city was going to continue with double digit increases every year,” Hendrickson wrote. “However, in 2009 construction took a substantial dive – dropping almost 73 percent — $522,000 — over the previous year. Fortunately, the addition of Costco, Home Depot, Red Robin and other businesses offset that loss.”
Still, from 2008-2010, total collections from all revenue sources was essentially flat.
“Given that some cities were seeing double digit declines I would say Covington weathered that storm pretty well,” Hendrickson said.
Then a year ago the city saw the biggest increase since 2008 and leading that again was construction, Hendrickson said, with 11 straight months of increases in revenue collection. It’s important to note that construction sales tax dollars are one-time collections while retail and restaurants provide a continuous stream of revenue.
And while there were three months where retail was down slightly other categories offset that.
To start this year, the first month saw increases in sales tax revenue at Costco of 6 percent, Fred Meyer was up 8.5 percent, Home Depot was up 8 percent, while food and restaurants increased 7.8 percent.
Meanwhile, construction revenue went up 202 percent due to MultiCare Emergency Department project which was recently completed.
“January is up because we are seeing a trend – both in retail and construction – that the economy appears to be doing better here and has been over the last 11 months,” Hendrickson wrote. “As far as the health of the business in the city, I can’t specifically say other than to note that the sales tax numbers are up, we are seeing more permitting this year than last and we will continue to monitor the trends.”
While those numbers are small signs of positive growth there is still more that needs to improve, Hendrickson wrote.
“Housing is still down unfortunately,” he wrote. “Real estate excise tax collections continue to lag. When they begin to increase due to increased home sales, then I think we can begin to look forward to a recovery from the recession.”
