As Sales-Tax Revenue Growth Slows, Austin Moves to Rein In Spending

DALLAS - Sales tax revenue growth has fallen below projections in Austin, prompting the capital of Texas to slow the pace of spending under the current budget, officials said.

While sales tax revenue is still growing, the slowing economy has reduced the rate to 4.7% from a projected 7.6% increase in the current fiscal year through January over the same period last year.

To avoid overshooting the budget, the city will delay filling 225 open jobs, officials said.

Like other Texas cities, Austin relies heavily on sales and property taxes for its operating revenue and debt service. About 30% of the general fund comes from sales taxes. Since the current fiscal year began Oct. 1, the city has taken in $52.7 million of a projected $165 million in sales tax revenue.

Sales taxes make up about 30% of the general fund that pays for basic services.

City Council members said they were not surprised by the lower-than-expected sales tax revenue because of the downturn in the economy and the difficulty in predicting month-to-month sales tax volume.

However, officials in other Texas cities took note of the development.

"Now that we know that, we'll certainly watch for any similar developments," said Janice Evans, spokeswoman for the Houston controller's office. "But we are not changing our numbers."

Houston - the world's energy capital with a growing diversity of medical and high-tech industries - led the nation in job growth last year with 100,000 jobs.

"We are somewhat insulated," Evans said. "We are seeing some impact on the economy because of housing, but our sales tax revenues are growing."

In San Antonio, budget director Peter Zanoni said revenues have not fallen below projections of 4% growth for fiscal 2008, but added that the city is watching for any signs of trouble amid a softening economy.

"We're still seeing growth, but it is slower than we saw last year," Zanoni said.

State sales tax revenue in February rose 8.8% to $1.79 billion in February, the most recent reporting period, according to Texas Comptroller Susan Combs.

"For the first half of fiscal 2008, state sales tax collections are up 7.1% over fiscal 2007," Combs said. "Although growth is slower than the two previous fiscal years, increases in state sales tax revenues continue at a steady pace."

Combs delivered $436.1 million in March sales tax payments to Texas cities, counties, transit systems and special purpose taxing districts, a 9.9% increase compared to March 2007. So far this calendar year, local sales tax allocations are up 7.1% compared to the first three months of 2007.

State sales tax revenue for February and March payments made to local governments represent sales that occurred in January.

For the calendar year-to-date, city sales tax allocations are running 6.8% higher than last year, according to Combs. Texas counties received sales tax payments of $26.8 million, up 10.5% compared to one year ago. For the calendar year-to-date, county sales tax allocations are 7.2% higher than last year.

Austin - one of the region's fastest growing cities, with an employment base stabilized by state government and the University of Texas - earned an upgrade to AAA from Standard & Poor's in February, affecting $782 million of outstanding tax-supported debt. Moody's Investors Service and Fitch Ratings rate the city Aa1 and AA-plus, respectively.

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