Business

Sales tax revenue in a comeback

By ERICA HALL

The Mirror

An upswing in construction has led to better-than-expected sales tax revenue in Federal Way.

But though city officials are optimistic, they’re 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 year’s 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, we’re 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 won’t know if increases in the rate of inflation and fuel prices are essentially washing out the gains made in sales tax. Officials won’t 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. “It’s hard to tell now. Inflation will drive up all costs, including personnel. It’ll 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, ehall@fedwaymirror.com

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