Tax

Tax revenues collected on sales made in March in Nogales may be the first sign of the local economic impact of the COVID-19 crisis, but any sales slowdown didn’t start hitting Santa Cruz County as a whole that month.

For the City of Nogales, sales tax revenues received in April came in at $776,000. That’s a more than 30-percent decline from the $1.1 million the city saw in April 2019.

The county government’s sales tax revenues were up compared to the previous year. Tax revenues allocated to the county in April hit $537,000, up from $393,000 last year.

Sales tax revenues are distributed by the state and generally reflect sales made in the previous month.

The City of Nogales takes in a total of 2 percent on retail sales in city limits, while the county government levies a 1-percent tax on sales in all of Santa Cruz County.

Beginning in mid-March, authorities in Arizona and Sonora began closing schools and businesses in response to the COVID-19 outbreak. On March 21, travel restrictions went into place at the U.S.-Mexico border, barring many of the customers that patronize local businesses from making their regular shopping trips.

County Manager Jennifer St. John said she was “pleasantly surprised” by the April numbers, but said she was expecting to see lower numbers in May and June as the impact of the crisis sets in.

At a May 5 meeting of the County Board of Supervisors, St. John said she’s forecasting a 25-percent decline in sales tax revenues from March through the end of 2020.

“We’ve asked the departments to start with a 5-percent overall cut to their budget with the caution that once the sales tax revenue comes in, there potentially could be additional cuts sooner or later, depending on the sales tax revenue,” she said.

In a follow-up conversation with the NI, St. John said that the county had seen better-than-expected tax revenues in months prior to the pandemic.

Jeanette Parrales, finance director for the City of Nogales, said at a May 6 council meeting that the city, too, was still ahead of revenue forecasts for the fiscal year to date.

“We’ve been doing very well this year,” she said.

But with the likelihood that those good fortunes could soon change, the city has been engulfed in a power struggle between the city manager and council in recent months and hasn’t taken concrete action to cut planned spending.

Parrales said that the city’s finances could weather the storm through the end of the fiscal year, which ends on June 30, but they would need to look at cuts for fiscal year 2021.

“It’s going to be a challenge to balance the budget,” she added.

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