Galveston to look at spending freeze

GALVESTON — Facing sharp declines in sales tax revenues, city officials might be forced to freeze spending.

Sales tax revenues in Galveston have been dropping steadily since October, Jeff Miller, director of finance, said.

In January, the city collected $931,083 in sales tax revenue, $441,000 or 32 percent less than the $1.37 million it collected in January 2009.

So far in 2010, sales tax revenues are down 29 percent from last year and 20 percent below budget.

“We’re going through a tight, tough time at this point,” City Manager Steve LeBlanc said.

LeBlanc will ask city council members today to consider approving in late March an ordinance suspending the budget until the city’s financial situation improves.

The city might have to freeze up to $1.2 million, or about 2 percent of the city’s $49 million operating budget, Miller said.

Council members will have to decide which budgets to freeze, LeBlanc said. The city might have to slow down on hiring new employees or put a hold on certain capital projects financed from the general fund, he said. The city will continue to pay for repairs on hurricane-damaged infrastructure and housing using federal dollars allocated by the Federal Emergency Management Agency and by Congress.

LeBlanc said he is not expecting to lay off any city employees.

City officials had been eyeing the falling sales tax revenue for months, hoping spending would pick back up.

“We were hoping it was a blip on the screen,” LeBlanc said. “It’s not. It’s a trend.”

LeBlanc blamed the declines in sales tax revenue on the national recession and the slowed hurricane recovery.

In November 2008, sales tax revenue jumped by 9 percent, largely as a result of post-Hurricane Ike rebuilding. Sales tax revenue poured into the city as hurricane victims rushed to spend insurance money to replace hurricane-damaged goods, including furniture and appliances.

That rebuilding boom seems to be over, LeBlanc and Miller said, pointing to a sharp decrease in building permits between September and October 2009, the same time sales tax revenue started to dip.

“It’s like someone flipped a switch in October,” Miller said.

It seems Galvestonians who had insurance money to rebuild their houses and replace their lost belongings already have done so, LeBlanc said.

Those who did not have the resources to rebuild on their own are waiting for help from the city’s federally funded disaster recovery program.

Those dollars will pay to repair and reconstruct 1,100 hurricane-damaged houses in Galveston, but, because the recovery program is federally funded, any construction materials purchased with the Community Development Block Grant money can be purchased tax free. The city might, however, see some indirect increases in sales tax revenue. Contractors who flock to Galveston to rebuild houses will eat in local restaurants and buy gas on the island, LeBlanc said.

The city also could see a boost in sales tax revenues in the summer when tourists visit, but city officials don’t expect to see increases in sales tax revenues any time soon as the recession drags on, LeBlanc said.

“This trend is going to go on,” he said. “I don’t think anybody can realistically believe summer will be spectacular ... Really and truly, the down economy has come to Galveston.”

Spending is down across the state and Galveston County.

Year-to-date, League City has collected 11 percent less in sales tax revenue than the same time in 2009. Texas City collected 29 percent less year-to-date, while Dickinson’s sales tax revenue was down 26 percent from the same time in 2009.

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At A Glance

WHAT: Galveston City Council workshop

WHEN: Noon today

WHERE: City hall, 823 Rosenberg

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Declining Sales

2010 to date sales tax revenue payments from the state:

Bayou Vista: $13,592.26 (down 15.7 percent from 2009 to date)

Clear Lake Shores: $411,519.56 (down 28.57 percent)

Dickinson: $759,535.69 (down 25.58 percent)

Friendswood: $896,126.73 (down 10.51 percent)

Galveston: $3,301,110.87 (down 29.16 percent)

Hitchcock: $156,535.98 (down 10.04 percent)

Jamaica Beach: $14,500.31 (down 24.37 percent)

Kemah: $643,303.59 (down 5.04 percent)

La Marque: $802,133.12 (down 25.24 percent)

League City: $3,102,832.69 (down 11.01 percent)

Santa Fe: $424,632.75 (down 16.09 percent)

Texas City: $4,583,513.03 (down 29.29 percent)

Tiki Island: $8,170.18 (down 32.44 percent)

County total: $15,117,506.76 (down 23.28 percent)

SOURCE: Texas Comptroller