Sales tax diversions in Columbus and Starkville grew only slightly between the 2023 and 2024 fiscal years, with growth in Columbus failing to keep up with the rate of inflation.
Columbus finished FY 2024 with $11.48 million in general sales tax diversions, up about 1.1% from the previous fiscal year. Starkville diversions for the fiscal year came in just less than $9.1 million, a 2.7% increase from the previous year.
Meanwhile, West Point saw 16.7% growth in its sales tax diversions, finishing FY 2024 with almost $3.1 million.
These totals only include the 18.5% the cities received from state sales taxes from businesses located within their corporate limits. It does not include any special sales taxes collected on food, beverages or hotels.
The national rate of inflation from September 2023 to August 2024 was 2.5%, according to the Bureau of Labor Statistics.
“Annual inflation rates were trending upward for the better part of two years. Yet, consumers kept spending, likely due to pent-up demand after the pandemic and rising real wages,” said Kathleen Thomas, a professor of economics at Mississippi State University, describing the COVID-era trend of prices and sales tax collections increasing significantly. “But wage growth has started to cool. Consumers will change their spending habits when faced with high prices, but they will also pull back their current spending based on their expectations about the future.
“Maybe consumers worry that their work hours will be reduced, or they won’t receive a bump in pay this year,” she added.
Jim Brigham, chief financial officer for the city of Columbus, said he is very concerned about sales tax growth not keeping up with inflation, as well as a potential “cooling off” in the economy that can take those collections down with it.
Cities depend on sales and ad valorem (property) taxes as their chief sources of revenue, and Brigham noted sales taxes are, by far, the most unpredictable.
“That’s why I want to have that buffer in the budget,” he said, referring to the nearly $500,000 projected surplus the city included in its budget for FY 2025, which starts Tuesday.
Still, the budget includes 4% in projected sales tax growth, nearly four times the bump Columbus actually saw in FY 2024. Though Brigham said he is fairly confident the city will hit that mark, the “buffer” can cover if collections are flat.
Starkville was even more aggressive, projecting 6% in sales tax growth for FY 2025.
Ward 2 Alderwoman Sandra Sistrunk, who chairs the city’s budget committee, said that estimate would be unreasonable if not for a couple of special circumstances.
FY 2025 will be the first full year of operations for Cornerstone Park – a tournament-caliber baseball/softball complex off Highway 25. Sistrunk said a partial year’s collections there show promise.
“As we see more tournaments, we’ll see more sales tax related to that,” she said.
The bigger boon, she said, is up to $400,000 in additional sales tax diversions expected from the Triangle Crossing Shopping Center on Highway 12 – which includes Aldi, Marshalls and PetSmart.
Since opening in November 2022, sales taxes collected at the shopping center have gone to developer Castle Properties through a state-sponsored redevelopment incentive, Sistrunk said. The incentive will end in January, when the city will start receiving its share of those collections.
In 2023, the last time the city budgeted aggressively for sales tax revenue, diversions fell short by $500,000.
Traditionally, Sistrunk said, the city has budgeted for 3% sales tax growth because that is “what inflation (usually) is and it’s as good a guess as anything else.” She thinks even that might be too aggressive now under normal circumstances.
“If I were doing our budget now, and I didn’t have any new revenue streams I thought we’d be factoring in, … I would probably try to keep us in that 2 to 2.5% just to give a little bit of cushion,” she said.
West Point retail renaissance
Mayor Rod Bobo understands the “cooling off conversations” related to the economy. But when he looks around West Point, he just doesn’t see it.
A slate of restaurants have opened in the last 18 months, he said, and the city is experiencing an uptick in retail options.
“Our downtown is bustling,” he said. “And we’ve got Mom and Pop stores springing up all over town.”
The good news isn’t stopping either.
Two grocery stores are set to open this fall, Bobo said. A Fresh Value is coming to the old Save A Lot, while a Hometown Grocery will bring a grocery, pharmacy and hardware store to the old Walmart building on the north side of the city.
“We’re optimistic,” Bobo said.
Zack Plair is the managing editor for The Dispatch.
You can help your community
Quality, in-depth journalism is essential to a healthy community. The Dispatch brings you the most complete reporting and insightful commentary in the Golden Triangle, but we need your help to continue our efforts. In the past week, our reporters have posted 47 articles to cdispatch.com. Please consider subscribing to our website for only $2.30 per week to help support local journalism and our community.