Placentia’s sales tax revenue is higher than expected amidst the pandemic, according to the city’s mid-year budget report.
The City Council in mid-February amended the city’s budget to reflect the additional income. The city’s 2020-21 mid-year budget report reflected an increase in revenue of $1.1 million and an increase in expenditures of $1.7 million. The council has decided to take $617,132 from the general fund to offset the difference, according to a city staff report.
The report goes on to break down Placentia’s mid-year financial health:
Overall, the general fund amended budget includes $39.6 million in revenues and $37.9 million in expenses. Additionally, the projected higher revenues include an increase of $707,647 in sales and use taxes.
Jessica Brown, the city’s finance director, in a telephone call elaborated on what caused the increase during a financially taxing pandemic.
“The city decided to take a conservative approach while budgeting the sales tax this year because we didn’t know what to expect. This approach combined with the Wayfair Decision is what made the difference in sales tax revenue,” Brown told the Voice of OC.
The U.S. Supreme Court’s Wayfair Decision allowed cities to collect sales tax through online transactions.
“With the pandemic, many people had already turned to online shopping so we saw an increase in online activity that we hadn’t seen in the previous fiscal years,” Brown said.
The staff report anticipates the city’s general fund contingency reserve will grow by $4.3 million for a balance of $7.8 million.
“This increase is mainly due to revenues projected to come in significantly higher than staff originally budgeted, coupled with the receipt of CARES Act Funds (Coronavirus Aid, Relief, and Economic Security Act) designed to reimburse the city for COVID-19 related expenditures,” the document explains.
As a result, the city “is fairing very positive,” states the report. “Should the city’s forecast figures generally stay consistent with planned revenues and expenditures, the 2020-21 budget is on a structurally sound and fiscally sustainable path.”
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