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Texas city eyes contingency plan for economic changes

The boom has been good to the Coastal Bend. It’s lured jobs and high-profile industrial projects to the port and the oil field. Sales taxes and property values swelled.

But a drop in anticipated sales tax growth during the past year — amounting to a $4.8 million shortfall in expected revenue for the city’s general fund — has some officials thinking about how to prepare for the “what-ifs.”

Sales taxes were slightly down during the 2014-15 fiscal year, which ended Sept. 30. They came in about half a percent lower than the previous year, according to the latest figures, said Eddie Houlihan, assistant director in the city’s finance and management division.

City officials had anticipated a 6 percent increase.

Several experts say Corpus Christi remains in a good economic position: Among other positive indicators, the area has more industries than oil bringing in money and offering well-paying jobs, most notably in natural gas liquefaction facilities. Cheniere Energy, for example, is under construction.

The city’s budget continues to increase, said City Manager Ron Olson. From his perspective, the discussion is about how to handle changes in the budget, whether it performs better or worse than expected, he said.

In addressing sales taxes, the newly adopted budget adjusted estimates, taking into consideration the changing economy, Olson added.

It’s generally believed the slowdown in sales tax growth is likely from changes in the energy sector.

About $63.2 million in sales taxes were budgeted for the general fund in fiscal year 2014-15, Houlihan said. The figure was based on current trends at the time, he added.

The final amount of sales taxes for that fund has come in at $58.35 million, Houlihan said. That would put it slightly below the amount drawn last year, $58.6 million.

The general fund sales taxes increased 6 percent from $55.3 million in 2012-13 to $58.6 million in 2013-14.

Sales taxes are divided between the state and the city. In Corpus Christi, local sales tax collection goes to the city’s general fund, as well as special, voter-approved programs such as the Regional Transportation Authority and the city’s business and job development corporation, which focuses on promoting economic drivers.

Related: Retail gasoline prices in Texas, nationwide down 2 cents

In total, $80.8 million was collected locally in the 2014 calendar year. In 2015, local collection was $53.4 million through August, compared to $53.9 million during the same time last year.

In September, officials had estimated a $4.2 million shortfall in sales taxes for the 2014-15 general fund, which would have been a .9 percent increase over the previous year. Those taxes were expected to bring in about 28 percent of the revenues for the general fund, according to the 2014-15 budget.

To address the projected changes, the city budgeted for a 1 percent increase in sales tax revenues for the coming year. It would represent an additional $590,000 in revenue, with an overall of $59.6 million budgeted for general fund sales taxes, Houlihan said.

A slowdown in sales tax growth in Corpus Christi could be considered a minimal effect considering how changes in the oil field landscape have marked other communities. Smaller cities that saw a major windfall with the dizzying rise of the Eagle Ford Shale have suffered big losses as county coffers, once bursting with new funding, fell bare.

Longtime residents of communities that rely heavily on the energy sector for a healthy economy can attest to the boom-bust cycle. Corpus Christi fell victim to that in the 1980s. But economic predictions show the city may be somewhat insulated this time around, experts say.

A look at two other cities in the center of the energy boom show varied effects.

In San Angelo, for example, the Standard-Times reported city sales tax collection for the 2014-15 fiscal year — $32.6 million — about 4 percent higher than 2012-13, $31.3 million.

In Alice, the city saw a significant decrease through August. From January to August 2014, local sales tax amounted to $8 million, according to a report on economic trends issued by the Corpus Christi Regional Economic Development Corp. During the same time period by calendar year, the city drew $6.6 million.

Corpus Christi is seeing some of the effects of oil field cutbacks, wrote economist Ray Perryman in an email to the Caller-Times.

“The slowdown in the industry affects not only directly related firms such as oil field services or pipeline businesses, but also many others ranging from hotels and motels to restaurants to car dealerships,” he wrote. “There are also well-paying jobs in the oil industry and related businesses, which have been eliminated, and the loss of these incomes and the resulting consumer spending is affecting Corpus Christi and retail sales tax receipts.”

Property values, meanwhile, have continued to rise. City documents show an 8 percent boost from increased appraisals. It’s thought the city will bring in about $9.2 million more than last year from increased appraisals and new properties on the tax rolls.

He doesn’t anticipate housing values dropping, “although some temporary leveling off may occur,” Perryman wrote.

He added that there are a “number of reasons to expect the Corpus Christi economy to perform well,” in large part because of investments in natural gas, which is in high demand across seas, and the port.

“One significant source of jobs and economic stimulus is the construction of natural gas liquefaction facilities in the area,” he wrote. “These facilities involve large construction investments (and therefore jobs for local workers) and well-paying positions once operational.”

One of the biggest indicators — unemployment — is down, said Iain Vasey, president and CEO of the Corpus Christi Regional Economic Development Corp.

The corporation’s economic trends report shows Corpus Christi’s unemployment in August at 5 percent, down locally from August 2014, which saw unemployment at 5.4 percent.

Some stories coming out of the oil field include workers who may be laid off, only to get a construction job for a large project the next week, Vasey said.

Overall, Corpus Christi remains in a strong position, but it makes sense to plan, he added.

“Given the volatility of the energy sector, it is always a good idea to prepare for all the variables in the economy,” Vasey said. “One of the things we’re looking at here at the EDC is undertaking research into economic diversification strategies.”

Increased revenue from property taxes and the industrial district is expected to cover last year’s shortfall on budgeted sales taxes.

City Councilman Chad Magill has raised questions about sales tax revenue.

“Corpus Christi has a strong economy right now,” Magill said later. “Why I’m asking the questions I am is to prepare for potential challenges that may or may not come. But it’s better to be prepared and ready than not.” _

This article was written by Kirsten Crow from Corpus Christi Caller-Times, Texas and was legally licensed through the NewsCred publisher network.