Killeen is on track to shatter a budgeted 1.5% increase in sales tax revenue established in the 2022 Fiscal Year budget with over $31.5 million in sales tax revenue.
Sales tax is collected by the Texas comptroller based on sales made within a particular taxing district, and is then paid out to the applicable city.
Some cities, like the small Texas town of Oglesby which enjoys a population of around 600, receive just over $30,000 annually, whereas cities of around 30,000 residents such as Harker Heights received $9.8 million and Copperas Cove received $6.5 million for 2021.. For comparison, Harker Heights’ revenue increased by roughly $700,000 in 2019 and 2020; in 2021, the city’s revenue exploded by nearly $2 million.
Killeen, with a population of roughly 155,000, typically receives annual payments in the $20 million range, with the amount increasing by approximately $1 million a year.
However, since the start of the COVID-19 pandemic, Killeen’s payments have increased dramatically, from a yearly average increase of just over 9% growth to as high as 17.6% from 2020 to 2021.
In 2020, Texas Comptroller Glen Hagar’s office paid Killeen $26 million in sales tax revenue, up from $24.8 million in 2019. And in 2021, Killeen received no less than $31.5 million in sales tax revenue.
According to Robert Tennant, associate professor of accounting at Texas A&M University-Central Texas, Killeen’s pattern of increased revenue may have to do with population growth, inflation rates, and “a new normal.”
“Simply put, people are changing how they live — or rather, they have changed how they live,” he said.
Lower housing costs, cheaper transportation and quicker travel times have led even more workers to consider living in Killeen and working in Austin, he said.
“Why would you buy a house for $750,000 in Austin when you can get a similar home for $250,000 in Killeen?” he said.
Moreover, Tennant pointed out that more and more jobs are workable from home — this means that workers are buying lunch and dinner in Killeen, rather then Austin, and spending their time and effort at home. Additionally, more people are conducting home improvement projects.
NPR reported in September of 2020 that home improvement has “surged across America,” and CBS Boston reported that home improvement and repairs have increased by 3% overall by March 2021.
The largest sticking point by far, however, is an increase in inflation.
According to the Bureau of Labor Statistics, inflation has risen by a total of 5.4%, from a low of 1.4% in January to a high of 6.8% in December — the highest it’s been since 1982.
This increase, though welcome by municipalities, will be difficult for many residents.
“The high rate of inflation presents challenges for people with middle income and below,” he said.
With higher prices for commodities and an annual median houshold income of $50,000 and individual annual income of $25,000, residents on the lower end of the economic spectrum can certainly feel a rapid increase in food, housing, medical and transportation prices since the start of 2021.
Though Killeen will certainly benefit from the revenue, it is also possible that it will experience similar difficulties.
Increased construction and labor costs will eat into new revenue; and while contracts locked in before the COVID-19 pandemic will allow the city to get more bang for their buck, the reverse is also true.
Any contracts the city enters into in the near future may see the city paying more after this current round of inflation subsides, without the current revenue surge.
Responding to questions from the Herald, City Manager Kent Cagle provided the following response as to the recent increase in revenue.
“Increased population, taxes on interstate internet sales are being applied more than in the past, new businesses have opened, people are spending less on travel and more on home improvement, and government checks have increased spending,” Cagle said.