CM22-001
CITY OF COSTA MESA
FINANCE DEPARTMENT
INTEROFFICE MEMORANDUM
TO: DISTRIBUTION
FROM: CAROL MOLINA, FINANCE DIRECTOR
DATE: FEBRUARY 8, 2022
SUBJECT: SALES TAX INFORMATION – 3RD QUARTER (JULY 2021 – SEPT. 2021)
Attached are the Third Quarter Sales Tax Receipts Reports (July thru September 2021). Costa Mesa businesses continue to rebound from the fiscal impacts that were brought on by the pandemic. The low interest rate environment and pent up consumer demand has resulted in stronger sales tax returns. The third quarter experienced a healthy sales tax receipts, particularly in the purchases of general consumer goods, such as high-end jewelry, automobiles and appliances. Additionally, higher property values have resulted in an increase in home improvement projects; thereby resulting in a healthy increase of building supplies sales, such as lumber.
As we continue to review all revenues received, it is important to remember that the travel/hotel industry continues to struggle. Business conferences have not yet returned to in-person events; thereby resulting in lower hotel occupancies than experienced before the pandemic. The higher sales tax receipts have helped offset the impacts of the hotel industry.
Staff continues to manage the fiscal year’s budget and work with HDL to obtain further information as it relates to the City’s continued sales tax performance.
Please feel free to reach out to me directly if you have any questions.
_________________________________
Carol Molina
Finance Director
Attachments
Distribution:
City Council Members (7)
Planning Commissioners (5)
Department Directors and Staff
Finance and Pension Advisory Committee (9)
Carla Valenzuela, Chamber of Commerce
Attachment 2
www.hdlcompanies.com | 888.861.0220
Q3 2020*
Q3 2021*
Legend
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
SALES TAX BY MAJOR BUSINESS GROUP*Allocation aberrations have been adjusted to reflect sales activity General
Consumer
Goods
Autos
and
Transportation
County
and State
Pools
Restaurants
and
Hotels
Business
and
Industry
Building
and
Construction
Fuel and
Service
Stations
Food
and
Drugs
TOP 25 PRODUCERSCITY OF COSTA MESA HIGHLIGHTS
Published by HdL Companies in Winter 2022
SALES TAX UPDATE
CITY OF COSTA MESA
3Q 2021 (JULY - SEPTEMBER)
Audi Fletcher Jones
Autonation Honda
Best Buy
Bloomingdale’s
Carmax
Cartier
Chanel
Christian Dior
Connell Chevrolet
Eurocar
Ganahl Lumber
Company
Gucci
Hermes
Home Depot
IKEA
Louis Vuitton
Macys
Nordstrom
Pacific Auto Center
Orange Coast Chrysler
Jeep Dodge Ram Fiat
South Coast Toyota
Target
Tesla Motors
Tiffany & Co
Tourneau
Costa Mesa’s receipts from July through
September were 37.6% above the third
sales period in 2020. Excluding reporting
aberrations, actual sales were up 34.8%.
This strong percentage gain signifies the
continued rebound from the pandemic
impacts of a year ago.
Dramatic rebounds from multiple
retailers including women & family
apparel, department & jewelry stores
were largely responsible for the general
consumer growth. With minimal mask
requirements, available indoor and
outdoor options, continued pent up
demand to dine out, and return of the
County Fair, receipts from all restaurants
surpassed any amounts previously
reported.
Continued strong demand and limited
inventory for vehicles causing elevated
pricing for buyers contributed to
sensational returns from new and used
auto dealers, while an increased number
of commuters bringing about a lack of
supply having upward pressure on gas
prices resulted in stellar growth from
service stations.
Revenue from building-construction
suppliers rose during this summer
period with a solid housing market, still
rather low interest rate environment
and increased cost of lumber having an
impact.
Allocations from the countywide use tax
pools also grew 16%, however this is less
than most recent periods. Sales by online
merchants make up a considerable
portion of the overall activity, and total
purchases compared to the pandemic
shutdown periods are slowing.
TOTAL: $ 18,493,542
34.8% 18.8% 18.2%
COUNTY STATE
COSTA MESA
3Q2021
TOP NON-CONFIDENTIAL BUSINESS TYPES
Q3 '21*
Costa Mesa
Business Type Change Change Change
County HdL State
18.7%19.0%24.6% 2,061.7 New Motor Vehicle Dealers
39.2%45.8%70.9% 1,593.3 Family Apparel
16.4%16.8%2.7% 1,095.6 Used Automotive Dealers
52.1%50.4%53.4% 1,092.2 Department Stores
69.0%65.2%78.9% 864.6 Casual Dining
38.0%52.8%63.6% 846.5 Jewelry Stores
11.0%11.9%13.2% 792.1 Home Furnishings
53.3%62.8%52.2% 649.6 Service Stations
67.7%75.5%146.1% 578.8 Women's Apparel
14.4%16.4%48.0% 524.1 Quick-Service Restaurants
*Allocation aberrations have been adjusted to reflect sales activity *In thousands of dollars $0
$4,000
$8,000
$12,000
$16,000
Costa Mesa
Q3
18 Q3
21 Q3
19 Q3
20 County California
SALES PER CAPI TA*
*ADJUSTED FOR
ECONOMIC D
ATA
SALES TAX UPDATECITY OF COSTA MESA3Q 2021
STATEWIDE RESULTS
Local one cent sales and use tax receipts
for sales occurring July through September
were 18% higher than the same quarter
one year ago after adjusting for accounting
anomalies and back payments from
previous quarters. These aberrations had
been much greater than normal in the last
two years as the Governor’s Executive
Orders allowed businesses to defer some
sales tax payments as a supportive measure
during the pandemic. This program has
now expired, and merchant remittances are
more consistent, making cash receipts more
reflective of underlying economic activity.
The prior year comparison quarter was the
start of the pandemic recovery, and the
strong growth enjoyed since continued
with the recent results.
Surprisingly, one of the stronger sectors
has been restaurants and hotels. Originally
forecasted to take an extended amount
of time to recover, statewide sales tax
generated during the summer months
exceeded amounts from pre-pandemic
2019. Even with the availability of indoor
and outdoor dining, pent up demand
resulted in long wait times to enjoy local
culinary experiences. When combined
with increasing restaurant tabs as the
cost of food and staff wages surge, sales
tax remittances are expected to continue
growing. Additionally, while the industry
awaits the return of foreign tourism in
metropolitan areas, strong domestic travel
has helped varied regions around the state
especially Southern California and the
Central Coast.
Receipts from general consumer goods
marked a steady recovery, led by apparel
retailers, jewelry, electronic/appliance and
specialty outlets. Discount department
stores, especially those selling gas, helped
exemplify the strength of brick-and-mortar
merchants. Gains from the countywide use
tax pools however, slowed to 2% compared
to the high-water mark last year, which
had been boosted by new tax collecting
requirements imposed under AB 147 for
online retailers. All things considered, when
combined with positive economic trends,
these are a welcome sign leading up to the
holiday shopping period.
Although car dealers had expressed
concerns about inventory shortages due
to supply chain disruptions and computer
chip shortages earlier in the year, the sale
of new and used vehicles posted solid gains
regardless. Higher property values and good
weather contributed to strong building
materials and contractor returns. As
commuting workers and travelers returned
to the road with increased gas prices, fuel
and service stations also experienced a
dramatic recovery.
Overall growth is expected to continue
through the end of the 2021 calendar year.
Possible headwinds into 2022 include:
pent up demand for travel and experiences
shifting spending away from taxable goods;
higher prices for fuel, merchandise and
services displacing more of consumer’s
disposable income; and expected interest
rate hikes resulting in more costly financing
for automobiles, homes, and consumer
loans.