Business in Lake Havasu City took a beating in the early days of the pandemic as shutdowns force some businesses to close their doors, but overall the local economy managed to bounce back over the summer.
According to the sales tax reports for July and August, released by the state this week, sales tax revenues are up in nearly every industry in Havasu so far in 2020-21 and every retail category is outperforming last year’s pace as well. That doesn’t mean that everything is going smoothly or that every business in the city is making more than it did during the summer of 2019, but overall sales within the city through the first two months of fiscal year 2020-21 brought in 22.3% more city sales tax revenue than last year.
For Havasu Hardware, Manager Carl Weir said the roughest point during the pandemic so far came in the spring during the most stringent shutdowns. Weir said Havasu Hardware fared better than some during the spring after hardware stores were categorized as an essential business and they were able to stay open. But foot traffic in the store was particularly slow during that time and the business was certainly impacted.
Weir said for a while they only allowed five customers inside the store at a time.
“When we had to limit the number of people that can be in the store at the same time, or in an aisle, that is really when things were worst,” Weir said. “Then it got a little bit better when people started wearing masks and we could allow more people to come in. In the last two months the uptick has been good and it is progressing that way.”
Lake Havasu City’s mask proclamation was in effect from July until the end of September.
Although sales tax revenues in Havasu were up in July and August, Weir said he thought sales were still a little below normal at Havasu Hardware during that time. He said things have been steadily improving as restrictions loosen back up and people are more willing to venture out. He said September and October were better still, and the store is continuing to see an uptick in business into November.
The state reported a 31% increase in sales tax generated by sales of building materials, and lawn and garden supplies in Havasu in August 2020 compared to 2019, after a 31.2% increase year-over-year in July.
That doesn’t mean the pandemic hasn’t had an impact recently.
Weir said Havasu Hardware is still struggling to get its usual products as supply lines have been disrupted. He said shutdowns in Mexico and distribution centers have forced the store to stock different brands than it normally would, and other orders are being partially filled without any advanced warning.
“We are forced to buy other products to supersede the stuff that we can’t get,” Weir said. “When an order comes in we might only get 80% of what we ordered because they don’t tell you they can’t get it until the truck shows up.”
City sales tax revenues
Retail sales account for more than half of all sales tax paid in the city, and has produced $3,008,851 through the first two months of the fiscal year according to the report from the state. In all that is a 28.7% increase over the same months in 2019-20.
Online retail sales have shown the most growth throughout the pandemic and that trend continued with 112% more sales tax reported from online sales in July 2020 than in 2019, and 123% more in August than the previous year. Meanwhile, building and lawn materials, food and beverage stores, home furnishings and appliances, and motor vehicles and parts have all reported increases of between 20% and 40% in both July and August.
Brick and mortar retail has seen the most conservative growth compared to 2019, up 6.7% in July and 13.3% in August.
Other industries also fared well in the last couple months of summer with sales tax for boarding accommodations up 51.7% compared to 2019, restaurant and bar sales tax up 5.5%, communications and utilities up 41.2%, and rental, leasing and licenses producing 16.6% more in sales tax.
The “other” category brought in 52.8% less sales tax in 2020 than it did in 2019, but that only accounts for about $23,000 in less revenue. The construction industry also dipped slightly, but only by 0.7% compared to 2019, which works out to about $3,500.
Lake Havasu City’s additional 1% restaurant and bar tax brought in 2.7% less in July 2020 than the same month in 2019, but it rebounded with an 11% increase in August compared to last year. Overall the restaurant and bar tax brought in 3.6% more through the first two months of 2020-21 combined.
At the same time, Havasu’s 3% bed tax on hotels and motels has been well ahead of last year’s pace while bringing in a total of almost $400,000 through the first two months - up 52.2% from the same time in 2019-20.
Havasu’s sales tax figures through the first two months of 2020-21 have been significantly ahead of Arizona’s pace statewide, but Havasu’s allocation of state shared sales taxes has also gone up. The city received 35.2% more state shared sales tax in the first two months of the year than was predicted in the budget, and 10.5% more than it received in the same timeframe last year.
The Highway Users Revenue Fund has brought in less for Havasu through the first months of this fiscal year than it did last year, but it is still significantly ahead of projections in the budget. According to the major revenues report, Lake Havasu City has received a total of $1,506,917 from HURF so far in 2020-21. Although that is a 6.9% decrease from 2019-20, it is 32% more than was projected in the budget.
“It’s a mixed bag,” said City Manager Jess Knudson. “It’s not as low as originally feared when we forecasted the revenues in the budget, but it is a concern to see the pattern we have seen of HURF revenues declining over the last several months compared to years past. What that means is we will have less dollars to spend on our roads and right-of-ways in Lake Havasu City.”
Lake Havasu City has also seen a significant increase in revenues from users of the water and wastewater systems. According to the report water user fees have produced 15.8% more than last year – 25.5% more than budgeted. Meanwhile wastewater user fees have brought in 16.9% more than last year and 28.1% above budget.
“I attribute that to more people living in Lake Havasu City,” Knudson said. “Previously we might have some vacation homes and second homes that may be used sporadically throughout the year, in many instances we are seeing those homeowners utilizing their vacation property here in Lake Havasu City for more days out of the year.”
Knudson said increases in the number of summer visitors in hotels, motels, and vacation rentals over the summer also contributed to increased water and wastewater use in July and August.