Soaring sales tax revenue collected by the City of Odessa in June topped Midland for the fourth consecutive month — an unusual trend likely resulting from Odessa’s robust oilfield services sector.
The City of Odessa received a June sales tax check from the state of more than $5.5 million, more than 49 percent greater than the payment during the same month last year. A fifth of the city’s sales tax revenue, or more than $1.4 million, goes to the city’s Odessa Development Corporation for economic development. More than $4.4 million will go to the city’s general spending fund.
The windfall, which outpaces a record-setting 2015, enables the city to shore up reserve funds and consider new projects as demand for services increases during the oil boom.
Midland has also enjoyed several months of sales tax revenue growth — just not like Odessa. This month, Midland collected more than $5.1 million. That was a nearly 16 percent increase from June 2017 for the Tall City, which has the same 1.25 percent sales tax rate as the City of Odessa.
Midland has a higher median income and significantly greater property tax base than Odessa. It’s also home to more oil company headquarters.
But the explanation for Odessa’s greater sales tax windfall is a simple one: the oilfield services sector that is driving Odessa’s booming economy.
“We have the service companies in Odessa and Midland doesn’t have as many there,” said Wes Burnett, director of economic development at the Odessa Chamber of Commerce. “Those guys charge sales tax on everything they do.”
That includes equipment, such as pipe or parts, and time. Such business-to-business sales in the oilfield are driving the influx of sales taxes into local government coffers.
“A lot of that activity is in Ector County,” said economist Ray Perryman of the Perryman Group. “Midland has more headquarters and office operations. A lot of people don’t realize that about half of the sales tax in Texas is paid by businesses.”
At the same time, Odessa’s retail sector has been strong with new outlets and restaurants, Perryman said. The Ector County Hospital District has also seen growth in sales tax revenue this year and received a June sales tax check of more than $4.1 million, which is more than 37 percent greater than during the same period of last year.
The sales tax windfall now exceeds what City of Odessa budget writers predicted for this point in the fiscal year by more than 65 percent — or more than $15 million. The city budgeted about $30.7 million in sales tax revenue for the fiscal year ending Sept. 30.
In the coming months, city leaders will craft a budget and consider funding one-time expenses such as manning an additional ambulance or two, Interim Assistant City Manager Cindy Muncy said. Mayor David Turner cited a need for more ambulances during his State of the City address in April, citing surging demand.
The Odessa City Council will also likely consider pay increases for employees, which are usually awarded at 3 percent in years when the city can afford it.
“We stay pretty conservative with our projections going forward, but we are looking at pay increase, trying to hang on to good people with what’s going on in the oilfield,” Muncy said.
CHECKS ISSUED IN JUNE COMPARED TO THE SAME MONTH OF 2017
- Alpine: $132,078.13, up 4.21 percent
- Andrews: $537,323.09, down 0.4 percent
- Big Lake: $273,543.66, up 54.18 percent
- Big Spring: $256,652.59, up 4.32 percent
- Crane: $48,097.36, up 21.96 percent
- Fort Stockton: $327,244.08, up 21.94 percent
- Goldsmith: $8,863.88, down 0.47 percent
- Grandfalls: $3,930.49, down 10.33 percent
- Kermit: $240,651.02, up 117.07 percent
- Lamesa: $116,037.59, down 0.69 percent
- Marfa: $42,381.70, up 57.41 percent
- McCamey: $37,306.73, down 33.05 percent
- Midland: $5,102,298.67, up 15.89 percent
- Monahans: $363,111.87, up 29.06 percent
- Odessa: $5,545,957.30, 49.18 percent
- Pecos: $1,036,286.20, up 87.28 percent
- Presidio: $29,651.08, up 3.8 percent
- Pyote: $13,950.35, up 286.95 percent
- Rankin: $14,524.18, down 21.93 percent
- Stanton: $75,095.85, up 55.25 percent
- Toyah: $1,941.09, down 31.53 percent
- Wickett: $37,764.58, up 395.14 percent
- Wink: $56,774.68, up 55.61 percent