COVID-19 pandemic likely to cause sales tax loss for Ohio municipalities
Most municipalities will lose money because of decreased shopping, study
finds

Date:
August 18, 2020
Source:
Ohio State University
Summary:
Small municipalities in Ohio that rely on retail sales taxes from
apparel, vehicle sales, restaurants and tourism could see as much
as a 50 percent decline in tax revenue because of the COVID-19
pandemic, a new study has found.



FULL STORY ========================================================================== Small municipalities in Ohio that rely on retail sales taxes from apparel, vehicle sales, restaurants and tourism could see as much as a 50 percent decline in tax revenue because of the COVID-19 pandemic, a new study
has found.


==========================================================================
The study, published Monday in the journal Local Development and Society,
also found that municipalities that rely on grocery stores for sales
tax income could see a small increase in funding.

Smaller cities and towns were likely to see big swings in lost or gained
tax revenue, while larger cities will only be moderately affected,
findings suggested.

And retail sales in every part of the state, no matter the geographical location or size, would be affected by the pandemic. In some areas, a
village that could lose as much as 50 percent of its revenue is located adjacent to a village that could gain as much as 25 percent.

"Every metropolitan and nonmetropolitan area has winners and losers,"
said Yas Motoyama, the study's author and an assistant professor of
city and regional planning in The Ohio State University Knowlton School
of Architecture.

"I was originally worried that economically distressed parts of the state
may have had more losses, but it turns out that that is not the case."
Overall, Motoyama said places with grocery stores and big-box supercenters
were likely to gain tax revenue; places that relied on outlet malls,
small clothing shops, restaurants, tourism or car sales were likely to
lose revenue.



==========================================================================
Ohio has a population of 11.7 million with more than 1,300
municipalities. Of those, Motoyama found that 74 had no retail
or food-service establishments and another 429 had no business
establishments at all. For this study, Motoyama analyzed the remaining
858 municipalities, which included the largest cities in Ohio (Columbus, Cincinnati and Cleveland), and everything smaller.

His projections showed that more than 80 percent of those municipalities
would experience some revenue loss because of the COVID-19 pandemic. And
about 18 percent could see an increase. The municipalities likely to
see an increase in revenue were those that had only food and beverage
stores and no other retail establishments.

Larger cities were likely to lose revenue, Motoyama found, but those
losses were relatively lower -- on the order of 9.7 to 12.5 percent --
compared with smaller cities that could lose as much as 50 percent.

"Larger cities typically have larger, more diversified tax bases,"
he said.

"Smaller municipalities -- those with fewer than 3,500 people --
typically have just a few industries. There isn't as much diversity
for those municipalities to draw from." Motoyama used data from the
U.S. Department of Commerce for changes in retail sales from February to
March 2020, and found that, during that time period, the retail sector
in the United States declined by 8.7 percent.



==========================================================================
But different types of stores saw different changes. For example, clothing
and accessory stores saw a 50.5 percent decrease, furniture sales declined
26.8 percent and motor vehicle sales dropped 25.6 percent. But sales of
food and beverages increased 25.6 percent. (That category covers grocery
stores and other shops; restaurant sales declined 26.5 percent during
that time.) Hotel stays declined 31 percent.

Then, he used data from InfoGroup Business, a private company that
gathers data on businesses, to estimate the employment or sales at the
business establishment level and to calculate aggregate sales at the
municipal level.

He then built mathematical models to show how the number of employees
and annual sales revenue might decline in 2020, based on the February
and March decline shown in the U.S. Commerce Department data. And he
assessed the level of reliance each municipality in Ohio has on each
type of retail business.

For example, the village of Bratenahl, a suburb of Cleveland, has a
population of fewer than 1,200 people and a handful of retail spaces,
many of which closed during Ohio's COVID-19 lockdown. This city may face
up to a 50 percent decline in revenue.

"For these municipalities to continue providing the services they provide
- - police or road maintenance or trash pickup -- they are going to have
to find a way to get more money," Motoyama said. "My hope is that these projections can help them prepare for that kind of situation."

========================================================================== Story Source: Materials provided by Ohio_State_University. Original
written by Laura Arenschield. Note: Content may be edited for style
and length.


========================================================================== Journal Reference:
1. Yasuyuki (Yas) Motoyama. What kind of cities are more vulnerable
during
the COVID-19 crisis? Local Development and Society, Aug. 17, 2020;
DOI: 10.1080/26883597.2020.1794755 ==========================================================================

Link to news story: https://www.sciencedaily.com/releases/2020/08/200818142125.htm

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