Most City Sales Tax Categories Up This Fiscal Year; Construction Down

By Cindy Barks | Cindy_Barks

Originally Published: February 22, 2022 9:38 p.m.

Businesses in Prescott and along Whiskey Row could be required to get a city business license. The issue most recently came before the City Council on March 1.

Businesses in Prescott and along Whiskey Row could be required to get a city business license. The issue most recently came before the City Council on March 1. Photo by Les Stukenberg.

Although construction revenues are down significantly in the current fiscal year, surges in Prescott’s retail stores, restaurants and bars, and hotels are more than making up for any downturns when it comes to sales tax revenues.

During a mid-year budget report on Tuesday, Feb. 22, Prescott Budget and Finance Director Mark Woodfill reported to the City Council that the city’s sale tax revenues were up by 6.3% in the first half of the 2021/2022 fiscal year.

That compares with a 12.4% rise during the same six months of the previous fiscal year (2020-21), and a 7.8% increase in 2019-20 fiscal year.

Contributing to the lower rise this year was a 33% drop in construction taxable sales, which Woodfill said includes the materials needed for new construction. “Construction is significantly down,” he said, adding, “We know it’s because of supply-chain issues.”

Construction is typically Prescott’s second-highest category for sales tax revenues – behind retail sales, which is the largest category by far.

For the first six months of this fiscal year, the city had $706,214,522 in taxable sales in the retail category. That compares with $648,230,314 for the same months in the previous fiscal year.

Construction taxable sales came in at $79,415,420 this fiscal year, compared to $118,507,771 for the first six months of the previous fiscal year.

The city category with the highest percentage gain this fiscal year was the hotels and motels category, which was up by 49%. With taxable sales of $28,324,268 in this fiscal year, hotels and motels dramatically outpaced the 2020/2021 fiscal year, when taxable sales came in at $18,964,124.

During the pandemic years of 2020 and 2021, Prescott’s hotels and motels saw a 3% drop from the previous year, but more than made up for that in this fiscal year. This year’s numbers also exceeded the pre-pandemic years of 2018/2019, which had $17,985,897 in taxable sales.

The restaurants and bars category showed a similar recovery this year. After being down about 13% in fiscal year 2020/2021, the taxable sales for Prescott restaurants and bars were up 24% in the current fiscal year. The total taxable sales of $73.9 million was significantly higher than the pre-pandemic year of 2018/2019, which had $65.3 million in taxable sales.

Online retail sales also showed a significant jump in the current fiscal year – up 28% from the previous year’s taxable sales.

In line with the growth in taxable sales for hotels and motels, the city’s 3% bed tax on hotel rooms showed major increases in each the first six months of the fiscal year, with July 2021 posting a 71% increase, and December a 64% rise.

“Bed tax is incredible,” Woodfill said of the increases. He pointed out that along with the recovery from the pandemic, the number also reflected the addition of new hotel rooms and higher room rates.

By December 2021, the city had already collected 93% of the bed tax revenue that had been budgeted for the fiscal year, and had collected 57.3% of the sales tax budgeted.

Tuesday’s meeting was the kick-off of the budget discussion for the coming 2022/2023 fiscal year. (See related story.)

Follow Cindy Barks on Twitter @Cindy_Barks. Reach her at 928-445-3333, ext. 2034, or cbarks@prescottaz.com.