Page 59 - Grapevine FY20 Approved Budget

Sales Taxes are a volatile revenue source in times of economic uncertainty. Factors such as
consumer confidence, unemployment, retail store relocations and weather conditions are just a
few of the many unpredictable circumstances which can affect collections. Another factor is
sales tax audits conducted by the state Comptroller’s office

In order to make sense of sale tax revenue, the sales tax moving average tool is utilized to zoom
in on small changes and to help identify trends. This is accomplished by computing the
difference between a 12-month
average and a 36-month
average. When the 12-month
moving average is above the
36-month moving average,
growth is rising, as most local
governments would like to see.
When the moving averages rise
to the point that the gap is wide,
concern should be registered as
to the sustainability of such a
rise. When the 12-month
narrows, touches or finally goes
below the 36-month moving
average, a yellow flag should turn to red, as this could be an indicator of trouble on the horizon.
At some point the actual revenues collected will decline in absolute terms if the downward trend
is steep enough or long enough.

The chart dramatizes the data spread so that the tremors can be better identified, along with the
trend. The city’s 12-month moving average has dipped below zero (negative growth) three times
within the last 20 years, with the last occurrence in fall 2017. While it did change course and
exceed 5% in February 2019, we know that gain was due to collections posted to Grapevine
erroneously. A modest 2% annual increase is projected in the forecast.

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