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Sales tax revenue in a comeback
By ERICA HALL
An upswing in construction has led to better-than-expected sales tax revenue in Federal Way.
But though city officials are optimistic, theyre warning against relying too heavily on construction as a long-term source of revenue.
City finance director Iwen Wang said sales tax is about 3.5 percent above last years projections, with most of the gains in construction.
And while construction activity is an unreliable long-term source of sales tax revenue, it is a good indicator of improvement in the local economy. It heralds growth in business activity that could translate into long-term sales tax revenue.
City officials are further encouraged by improvements in the state and local economy.
At this time, were looking at the statewide and nationwide economies steady recovery, Wang said. We believe the local economy will follow. We know revenues overall are picking up.
That said, city officials wont know if increases in the rate of inflation and fuel prices are essentially washing out the gains made in sales tax. Officials wont start working on the mid-biennial budget until August, when some personnel cost numbers become available.
We definitely need to look at both sides, Wang said. Its hard to tell now. Inflation will drive up all costs, including personnel. Itll become more clear in August.
Last year was a very good year for building permits, Wang said, and this year is even better.
Overall, the economy is improving, she said.
Staff writer Erica Hall: 925-5565, firstname.lastname@example.org