Fitch: Sales Taxes Show Uneven Recovery Among California Locals

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LOS ANGELES - Local governments in California have recovered from the economic downtown at an uneven pace, according to a review of sales tax data by Fitch Ratings.

The review, released April 24, found that the 100 most populated cities in the state experienced varying levels of change in economic activity since 2008.

'We found a significant degree of local variation," said Matthew Reilly, Director of U.S. Public Finance at Fitch. "The individual city performance was not fully explained by geography as adjacent cities recorded widely different results and, contrary to expectations, some inland cities outperformed coastal areas."

California as a whole experienced a very significant decline in sales tax revenues in 2009, but thereafter recorded solid growth rates. Overall, revenue was 5.7% higher in 2013 than in 2008.

On the local level, approximately 25 of the top 100 cities had not yet regained pre-recession levels of sales activity in 2013.

Approximately 25% of cities were still receiving less revenue from the 1% sales tax in 2013 than in 2008. Of California's 15 counties with two or more cities, 12 had at least one city that was still receiving less revenue from the 1% sales tax in 2013 than it did in 2008.

An additional 25% of cities significantly outperformed the state by recording revenue increases of at least 10% over the time period.

Among the state's largest cities, Bakersfield, San Francisco, and San Jose recorded the largest total increase from 2008 through 2013. Oakland and Sacramento were still receiving less revenue. Los Angeles and Fresno recorded growth, but remained below the state average.

"Fitch believes retail sales activity provides a useful indicator of overall economic activity," analysts wrote in the report. "Sales tax data provides a meaningful estimate of retail sales activity, allowing for comparisons of cities across the state on a fairly consistent and timely basis."

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