Monthly Economic Report: Sales Tax Revenues Fall Short of Projection

Audit Date: July 29, 2015
Audit Categories
  • Financial
Controller: Alan Butkovitz

Executive Summary

For Immediate Release
July 29, 2015

Contact: Brian Dries

Sales Tax Revenues Fall Short of Projection
City Controller’s economic report indicates $4 million refund in May
created shortfall for City

June 2015 Economic Report

PHILADELPHIA – City Controller Alan Butkovitz today released his latest monthly economic report that indicated a one-month $4 million refund in Sales Tax revenues for a tax incentive program significantly impacted the City’s yearly projection.

Yearly Sales Tax revenue for FY2015 totaled $151.9 million, which was almost $3 million, or two percent, less than what the City had projected for this one year in its Five Year 2015-2019 Budget plan. The lower revenue total was a result of the City earning $10.1 million in May after the refund, instead of $14.3 million that was actually generated.

A further review by the Controller’s Office determined that the refund was made to the Philadelphia Industrial Development Corporation (PIDC) for a payment that was related the 2008 Park West Tax Increment Financing (TIF) project. Refunds to PIDC in prior years have been about $800,000 annually.

“Our review into the May 2015 refund indicates the City did not anticipate the significant revenue loss to the General Fund in one month,” said Butkovitz.

As part of the City Controller’s recent Opinion on the City’s latest Five Year Budget Plan, Controller Butkovitz cautioned that any unforeseen circumstances such as unanticipated payments or unexpected commitments to other entities can impact the City’s budget.

“There is always a real possibility that projected funds may not materialize,” said Butkovitz. “This TIF refund is an ideal instance where the City cannot be overly optimistic with its revenue projections. Any slight decrease in revenues can reduce the overall fund balance.”

Along with reviewing yearly Sales Tax revenues, the Controller’s economic report indicates home sales for June totaled 1,541. This is an almost 30 percent increase over the same month last year. The majority of monthly sales occurred in neighborhoods throughout South Philadelphia, Fishtown and the portions of the Lower Northeast.