The city of Lincoln's largest funding source -- sales tax receipts -- ballooned in the last five years as the city grew, but that revenue stream seems to have slowed. 

The most recent analysis by the city Finance Department shows sales tax collections coming in about 3% lower than the city planned for as one budget year closes and another begins. 

City Finance Director Brandon Kauffman said that puts the city $2.6 million short of its $80.6 million projection for 2018-19, and leaves Mayor Leirion Gaylor Baird and her staff staring at a deficit ahead of budget adjustments. 

"Previously, post-recession, the sales tax has been pretty strong," Kauffman said. 

But Lincoln isn't alone in sensing a sudden lag in sales tax revenues. 

Lynn Rex, executive director of the League of Nebraska Municipalities, said her staff has fielded similar concerns from several cities in the state.

Overall state sales tax collections continue to show growth, according to the Nebraska Department of Revenue.

In Lincoln, Kauffman wasn't exactly sure why the collections came in lower than projected December through May but noted that local retail sales appeared to show negative trends.

By comparison, the occupation taxes collected to pay for Pinnacle Bank Arena have continued to show steady growth, he said.

Kauffman wondered whether the cold winter may have kept shoppers home or if a national trend was to blame.

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But national economic statistics don't implicate more conservative consumer behavior as the problem, said University of Nebraska-Lincoln economics professor John E. Anderson.

The U.S. GDP grew at a slower rate in the second quarter of this year, but consumer spending was stronger than usual, Anderson said. 

"When I hear that sales tax revenues are down relative to projections, is it because the revenues are actually down or is it because the projections are actually up?" he asked.

If Lincoln's trend holds, it would end up receiving about the same amount of sales tax money it budgeted for in 2017-18, according to the Finance Department.

And if city sales tax revenue remains flat, the trend would contribute to a $4.4 million shortfall in the second year of the budget cycle, which extends into 2020. The city projected sales tax revenue to grow by close to 4% both years.

City revenues from sales taxes grew between 3.7% and 5.2% in the four years between 2012-13 and 2016-17. Sales tax revenue slowed to 3% in 2017-18.

Built last year, then Mayor Chris Beutler's two-year budget accounted for the temporary quarter-cent sales tax for public safety improvements that ended in October 2018. 

That budget also planned to spend money from tardy property tax payments that was previously not earmarked and would have given those crafting budget adjustments a way to absorb unexpected shortfalls, Kauffman said.

The two-year budget kept the city's property tax levy unchanged.

Gaylor Baird hasn't publicly released her proposed budget adjustments, but last week, City Council Chair Jane Raybould said the new mayor was considering drawing from the city's cash reserve and trimming city spending to balance the budget. 

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Reach the writer at 402-473-2657 or rjohnson@journalstar.com.

On Twitter @LJSRileyJohnson.


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