I give an updated look at the forecast for sales tax collections in Grand Forks. There are statistical issues with the forecast but corrections are in the works.
The big month is finally here! We now have a month with sales tax numbers reflecting the increased sales tax rate for the Grand Forks. We are all so happy that we could… Alright, enough of that. The results are somewhat to be expected. From the May 2018 total June was down over $200,000. Costs go up with the sales tax increase and people and businesses adjust if they are able. The more problematic part really is that June 2018 is down almost 1% fro June 2017, more than $120,000. These are not outcomes we particularly like even though they are somewhat predictable.
The May release came out earlier this week and was a real whopper. It was quite high and well outside the 95% confidence interval of the forecast from last month. We need another month, or months, of data to determine the impacts of the tax increase though. This number could be high in anticipation of the higher rate, or it could be pent up demand shifted to March due to bad weather in January or February. Easter also occurred in March this year and, as my forecasting class saw, that increased sales tax collections in Grand Forks in the past so it could be that situation again. It could also be related to tax cuts at the federal level though I am a bit skeptical that it would just start showing up in spending data for March. Like I said though we need to see where it is at over the next few months before determining the longer term trajectory. Here is the updated forecast.
Alright, we got the update from the city and it was not pleasant. Year-to-date collections are down more than 10%, and cities preferred measure (though we do not know why it is preferred) is down 6.87%. The forecast was for $1.35 million in collections and it came in at $1.02 million. So my pessimistic forecast was still too rosy. Based on this the updated forecast for May is revised down to $1.3 million.
Over the past few weeks the conversation about sales tax has been pretty consistent and fairly intense. That is probably as it should be given the overall importance of revenue generation across the state right now. What have I done so far? I think the best thing to date may be the discussion surrounding the rolling twelve month series used by the city. Rather than accuracy it is more about stability. Eleven of twelve months in the series are the same from one month to the next so of course the series is stable. The flaws of this approach can be seen when you look at the recent decline. A good month is totally outweighed by the totality of the previous eleven. It also begs a statistical question: should all these months be given equal weight while in the series and then just disappear? That seems highly suspect.