Greenwood and many cities like it in Mississippi will soon be facing the difficult decisions with which private businesses in their communities have already grappled.
That’s because there’s a two-month lag between when sales are made in stores and when municipalities receive their cut of the sales tax.
For example, what the Mississippi Department of Revenue calls March sales tax collections reflect sales made in stores in February, 7% of which are turned into the state in March and then cities get back their 18.5% of the tax collections in April, plus any special levies such as tourism taxes.
So the numbers so far show just a small picture of the damage that is coming to municipal tax collections from the coronavirus because sales were only barely starting to be affected in February. The big hit came in mid-March, and then April will probably be the worst month for retail sales because the government-ordered cessation of many businesses and all gatherings was in effect for the full month.
This all means that when businesses began making layoffs in March, it might not hit local governments until this month. Then June will probably be the worst for cities (counties are more insulated from this pandemic because they are primarily funded by property taxes).
The city of Hattiesburg, one of the largest retail markets in the state, announced this past week that it is making layoffs, although it did not specify how many. Its sales tax collections from February sales, the most recent data available, were actually up 2%, but clearly Hattiesburg knows a big drop is coming. Other municipal governments will be facing the same dilemma.
Frankly, governments always carry more fat on the payroll than private businesses. This could be an opportunity to trim some of that off the taxpayers’ backs.
But if enough layoffs are made, city services will surely be affected. It’s inevitable, but hopefully a recovery will be quick. Residents should try to be patient if limb pickups or police response times slow a little bit as all of us slowly work to get back on our feet.