Toilet paper, home and garden supplies, drive-thru eateries power better than expected sales taxes in 2020 | Coronavirus

Houska’s Ace Hardware in Arnold

Tommy Aubuchon, right, checks out a customer Monday at Houska’s Ace Hardware in Arnold. The store has taken several COVID-19 precautions to protect staff and customers.

After the COVID-19 pandemic reached Jefferson County last spring, county and city officials were fearing the worst for their bottom lines.

To curb the spread of the virus, officials had to issue stay-at-home orders and mandates that forced some businesses to shut down and restaurants to close indoor dining, so they worried sales tax revenue would suffer.

But, with 2020 in the rear-view mirror, officials’ frowns have turned upside down.

The county’s 1/2-cent general revenue sales tax ended the Year of the Pandemic with a 6.09 increase from the year before. The tax netted the county $13,422,707 – the highest since the tax was first collected in 1980.

“I was thrilled,” County Executive Dennis Gannon said. “I was just happy we didn’t end up at zero (percent growth) – or worse. I really didn’t expect as strong of a finish as we had.”

Sales taxes are important because the county government and most cities rely heavily upon the pennies everyone pays on each dollar spent at the supermarket, the gas station and the hardware store.

The county funds about 42 percent of its day-to-day budget through a 1/2-cent sales tax, and two other 1/2-cent sales taxes provide much of the funding for law enforcement and for road and bridge improvements.

“We are very dependent on sales taxes,” said Arnold City Administrator Bryan Richison. “The problem with that is that, unlike property taxes, which tend to stay steady, sales taxes fluctuate year by year.”

Byrnes Mill City Administrator Debbie LaVenture said she, too, was happy to see sales tax didn’t tank as many expected.

“We were thrilled with the way it went,” she said. “It’s, of course, unfortunate to say the least that we all have been going through a global pandemic, but as far as the sales tax end of it goes, it turned in our favor, and for that, we’re thankful.”

Her counterpart in Herculaneum, Jim Kasten, said the government-issued stimulus checks issued in mid-year did what they were supposed to.

“During COVID, most people did not go on vacation, and many people stayed close to home, so they weren’t even going to St. Louis County,” Kasten said. “But they apparently were using those stimulus checks for what they were intended to do, rather than putting them in the bank. And, Buchheit (the city’s largest retailer) definitely got some of that business. The gardeners, yard people, remodelers, they didn’t go on vacation, but they were still spending their money. The checks that people got, for the most part, I think they spent them.”

Kasten said sales taxes contribute about a fourth of the city’s general operating revenue.

In Arnold, the county’s largest municipality, sales taxes make up about half of the day-to-day operations. There, after a couple of stagnant years in 2017 and 2018, receipts were up 4.12 percent in 2019 followed by a 3.41 percent jump in 2020. The city’s sales tax generated $6,845,789 in 2020.

“I think we were all preparing for the worst,” Richison said. “Usually, I don’t track it that closely, but in 2020, I started to look at it a lot more. I think it’s very clear that people were out spending money at Lowe’s, Home Depot and Walmart.

“Early on in the pandemic, when I was out, I saw the big box stores doing good business, so I was optimistic that a drop wouldn’t be as bad as we were all expecting. At the start of it, everybody was buying toilet paper. Walmart was selling that like crazy. None of us have ever been through anything like this, of course, so it was hard to know what was going to happen, but with the stay-at-home orders, people had a lot of time on their hands. When they got their stimulus checks, I guess it all worked like it was supposed to.”

That scene was playing itself out similarly at the opposite corner of the county, in De Soto.

“From the get-go, myself and other administrators were advising our boards to be very cautious,” De Soto City Manager Todd Melkus said, “but when I would go out, to the grocery store or to the other of our (large) retailers around town, they were packed, so I was cautious that we’d be able to see it through. Unfortunately, a lot of our smaller businesses – restaurants and shops – struggled through the year, some of them didn’t make it. But our major sales tax drivers continued to do good business, and we’re very thankful for that.”

De Soto collected $1,577,548 in sales taxes in 2020, a more than 11 percent jump from 2019.

Just under 50 percent of De Soto’s general revenue budget comes from sales tax.

The numbers were even better in Byrnes Mill, but LaVenture cautioned they’re not quite what they appear.

The city, which has about 60 businesses, including about 10 home-based businesses that don’t bring in much sales tax, saw a whopping 24.77 percent increase from 2019 ($325,766) to 2020 ($433,043).

However, LaVenture tempered that by pointing out that the 2020 figures include money from a 1-cent sales tax increase voters approved in June that the city started realizing in November.

Still, counting only January-through-October figures, the trend still holds true, with an uptick of $90,491 (25 percent) through the first nine months.

“I think a lot of that can be attributed to having a Hoods Home Improvement store in the city,” LaVenture said. “They were swamped for a lot of the year. I know every time I passed by, they were packed. We have a Walgreen’s. Business there was booming. They had a parking lot delivery, which also was a factor. I think in many cases, people went there for the items they had because they wanted to stay close to home.

“The restaurants we had in town did a good business. We have a Taco Bell and a McDonald’s, and their drive-thrus were always busy. We have two sit-down restaurants, both of which also did well. El Mariachi (a Mexican restaurant) had outdoor seating, so that helped. Company B Barbecue also did a lot of take-out business.”

Gannon said he heard figures from one of the major credit card companies in mid-year that illustrated what was going on.

“They said at the time restaurant sales were really down, grocery store sales were up more than 400 percent. I was expecting that to some extent,” Gannon said. “Some restaurants closed, but as the year went on, many restaurants were able to pivot – they were able to offer carryout, drive-thru, curbside, home deliveries – and some of them did very well. Others that weren’t set up to do that or weren’t able to adapt, they didn’t fare as well.”

Arnold’s Richison said his city may have been helped by more stringent orders in St. Louis County, where sit-down dining restrictions are just now being eased.

“I want to say, yes, (we did benefit from St. Louis County residents coming here), but I don’t have any data to back that up,” he said. “What I see is that our restaurants are doing very well, and I’m talking about the sit-down establishments that have limited their seating. During peak times, that seating always seems filled up. Where people are coming from, I would suspect some are coming from out of town because if people (from south St. Louis County) wanted to go out, they’d have to go south.”

Herculaneum’s Kasten said the bulk of his city’s sales taxes come from a community improvement district that includes all the businesses at the I-55 intersection with McNutt Street east to Commercial Boulevard (Hwy. 61-67) and south on Commercial to Crystal City, including the Buchheit home improvement store.

In 2019, that district generated $445,779 in sales taxes; in 2020, it did $495,509, a 10 percent increase.

“If we had a grocery store in town, that would have helped us some more, but we did have restaurants that didn’t close up, like LaPachanga’s and Cracker Barrel, and they were doing well with take-outs,” Kasten said. “Then, when the county started opening up, people started going back to them. Our drive-thrus also have done well throughout the time. We have gas stations and convenience stores that also were busy, selling odds and ends. I think a lot of people thought it would be easier to zip in and out of a convenience store and grab a few things rather than have to spend a lot of time going through a supermarket.”

Future uncertain

However, Gannon said he’s concerned that such changes in spending habits may not be beneficial in the long run.

For instance, he said, many people started to turn even more to online retailers such as Amazon during the stay-at-home orders – even people who were averse to online shopping before – and, because most local governments do not collect sales taxes from online purchases, the future may not be as rosy under a “new normal.”

“I think when you’re dealing with people’s spending habits, any time you give someone an option to spend their money a different way and they find it’s easier, you get used to it and it’s hard to go back,” Gannon said.

De Soto’s Melkus agreed.

“I think that will be more of an issue in the years ahead,” he said. “It won’t get better until the state steps up and allows local entities to enforce a use tax for online sales. It will start to be a real problem, probably sooner than later. I believe the way that people learned to shop online in 2020 like never before will have long-term effects.”

But in the end, county and city officials say they have no idea what’s ahead.

“As good as the sales tax was for us in 2020, my opinion is that over the long haul, it will be an anomaly,” Melkus said. “I believe it’s going to go back to where it was and we’ll come down to earth, with very small growth or maybe no growth at all. In drawing up the budget, I took 2020’s numbers with a grain of salt.”

Arnold’s Richison said 2020 proved that little is certain.

“Why didn’t we fall off a cliff? The best explanation I can come up with is that I didn’t expect that we’d do as well as we did during a global pandemic,” he said. “Things happened the way they did. I wish I could say we had a clever plan, but really, we were just along for the ride. This has been a surprise for all of us.”