LAKE JACKSON — Retail closures will heavily impact the Southern Brazoria County city that benefits from sales tax as its top revenue stream.
“The mall is a huge generator for our revenue,” Lake Jackson City Manager Bill Yenne said. “It’s going to be a real kick in the backside.”
Brazos Mall closed March 19 until at least April 1 in the wake of the COVID-19 pandemic. As state and county officials order residents to leave home only for essential errands, many retail stores, fitness centers, entertainment facilities and event centers will miss out on revenue.
For Lake Jackson, this impacts sales tax as well as revenue the city usually gets from recreation center activities and memberships and Civic Center and Jasmine Hall rentals.
Unlike the majority of Brazoria County cities where property taxes are the top source of revenue, Lake Jackson regularly budgets with sales tax as its biggest income source, followed by industrial district revenue then property taxes.
“We’re blessed to have most of the retail here,” Yenne said.
This allows the city to have one of the lowest tax rates in the state at 34.82 cents per $100 of property value, but it especially hurts it when sales tax decreases.
“This is why we do have healthy reserves and we’re going to do what needs to be done to get through this mess,” Yenne said. “It’s gonna stink.”
Since Texas cities’ sales tax collections are two months behind, Lake Jackson won’t know the impact of COVID-19 on sales until May, Yenne said.
Lake Jackson had anticipated almost $7 million in sales tax revenue for this fiscal year, Yenne said. They were “on track” with 41.7 percent of the revenue at 42 percent of the budget year, putting them only a fraction of a percentage behind, he said. In upcoming months, they’ll see exactly how much that changes, he said.
While combating an emergency, cities tend to spend money, but in other ways the leaders are trying to hold back, Yenne said.
The city already implemented a hiring freeze of 11 positions which will save about $400,000 annually, he said.
“We’ll see what it takes as we go forward from there,” Yenne said.
Another fund that will be impacted is the Hotel Occupancy Tax. This tax benefits the Brazosport Convention and Visitors Council run by the Brazosport Area Chamber of Commerce, Brazosport Fine Arts Council, Museum of Natural Science at the Center for Arts and Services, Lake Jackson Historical Association, Discover Lake Jackson tourism campaign and some city events.
Unlike other funds, the hotel occupancy tax fund only has about a month’s worth of reserves, Assistant City Manager Modesto Mundo said. It’s unclear how much hotels are affected by this event, but some have reported a stark drop in reservations and guests, he said.
“We will see it immediately,” Mundo said. “The groups will see it immediately.”
The groups will not be surprised, but they will have to make adjustments, he said. Every group uses the funds differently, he said.
Discover Lake Jackson has halted some operations but continues to share information about local restaurants and businesses.
“Continuing long term, I just don’t know,” Mundo said.
“We don’t know how long this is gonna go; nobody does,” Yenne said.