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May 8, 2008 - 8:53PM
Updated: May 8, 2008 - 10:40PM

Scottsdale tax collections are shrinking

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Donna Hogan, Tribune

Car sales in Scottsdale are slipping by double-digits, and construction is slowing down, but restaurant sales and bed taxes, a hotel surcharge paid by tourists, were up slightly for the last nine months.

GRAPHIC: See the change in Scottsdale's tax collections

That's all according to Scottsdale's fiscal year-to-date tax collections.

The figures paint a picture of a city experiencing an economic downturn, but not so severely as other locales.

For the July-through-March span, Scottsdale's overall sales tax collections were down 3 percent compared with the same period a year earlier.

The overall numbers bear an eerie resemblance to the 2001-02 fiscal year, said Mike Phillips, Scottsdale spokesman. The country was already sliding into an economic quagmire in fall of 2001, when Sept. 11 accelerated the plunge.

But in the details, this downturn is different. The Super Bowl and a stellar Cactus League season kept tourism taxes in positive numbers, while tax collections in other industries took deep dips.

Unfortunately, the two biggest categories of falling collections are also among the biggest tax generators for Scottsdale.

Motor vehicle sales for the first nine months of the fiscal year were down 10 percent. In the report issued Thursday, the city blames "a couple of car dealers leaving the city and the downturn in the economy."

Not so fast. While one dealer, Scott Toyota, just abandoned its south Scottsdale space for a Mesa location, and others, including Chapman BMW and Scottsdale Nissan plan to scoot to the south East Valley soon, none of the big dealers left the city in time to be reflected in the sinking sales numbers. So their bite on Scottsdale's budget is yet to be felt.

Scottsdale Area Chamber of Commerce CEO Rick Kidder said the sagging motor vehicle sales are an expected reflection of a sagging economy.

"I've talked with the dealers on Motor Mile, and, at times like this, car sales drop dramatically," Kidder said. "The worst thing now is the uncertainty. People are concerned about what this economic downturn means to them. Until they understand what it means to their buying power, we'll see purchase paralysis, especially for big-ticket items." The second worst category for tax collections - and, like auto sales, one of the city's most lucrative tax generators - is construction.

Phoenix-based Weitz Company, which is building the Barney's New York store at Scottsdale Fashion Square, hasn't seen any jobs canceled because of the downturn, said Trent Mostaert, vice president of operations.

But Mostaert said the pipeline of new developments - residential and commercial - has dried up for lack of backing. "It's hard to get construction financing," he said. That's because of the critical credit crunch banks and other financial institutions find themselves in, he said.

Phillips said Scottsdale's financial health is robust, and residents shouldn't worry that declining tax receipts will result in slashed services.

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