Thanks to its tourism-based economy, Winthrop benefits more from sales tax distributions than most towns in the state.
Other tourism hubs also benefitting
By Marcy Stamper
The town of Winthrop, with just 500 people, has an unusual distinction — among almost 280 towns and cities across the state, the town comes in second for the proportion of its revenue derived from sales tax.
In 2019, Winthrop got close to 57% of its revenue from retail and sales use tax — almost $862,000 out of $1.5 million in total revenue. Only Friday Harbor, on San Juan Island, was higher, netting close to 59% from sales tax. Leavenworth, at 51%, was third.
The tax data — and the insights the numbers provide — were compiled by the Office of the Washington State Auditor. Their online Financial Intelligence Tool (FIT) allows users to explore revenues, expenditures and other financial details for municipalities across the state.
The current FIT data are from September 2019. One of the office’s goals is to see the impact of COVID-19 on local revenue, and sales tax is a good way to capture that, said Duane Walz, a data and business systems specialist with the auditor’s office. “Will retail sales take a dive because of COVID?” Walz said. Since property tax remains more constant, it won’t reflect the same impacts, he said.
Data analysts had expected a big drop in 2020 hotel/motel taxes because of COVID restrictions on travel. But in November, when Walz checked with finance staff in Winthrop, Leavenworth and Friday Harbor, all towns were doing better than expected. People appeared to be vacationing closer to home, he said.
Okanogan County sales-tax revenues were down by 75% in the first half of the year, Okanogan County Treasurer Leah Mc Cormack said. But after a slow start, tax revenue picked up as tourism soared, she said.
Many of the top-10 cities for reliance on sales tax are tourist hubs. Stevenson (No. 5), on the Columbia River Gorge, gets a big boost from visitors to Skamania Lodge, according to their city administrator, and Long Beach (No. 10) is a vacation destination. But other cities at the top of the list collect their sales tax primarily from day-to-day retail sales, such as Burlington (No. 4), with its big outlet malls, and Chehalis (No. 6), home to several large car dealerships.
Winthrop’s high proportion of sales tax is noteworthy. The portion of revenue that stems from sales tax drops quickly as you go down the list. Only the top-three towns in the state got more than half of their revenue from sales tax in 2019, and only the top 15 got more than 40%. By No. 49, the proportion dropped below 30%.
Omak was No. 12 on the list, getting 43% of its $5.1-million revenue from sales tax. Twisp, on the other hand, gets just 22% of its revenue from sales tax ($447,000 of its $2-million revenue). Some towns in the county get even less — Pateros gets 12% and Oroville gets 11%.
Once they have the 2020 tax numbers, Walz will be looking to see if the trend for tourism to drive sales tax continues, or if more comes from other retail sales, he said.
Year-to-year comparison
Despite bleak predictions as the pandemic set in, many towns and counties saw their sales tax rise in 2020. In some areas, people were working from home — or not working at all — and therefore buying things locally, rather than near their job or en route to work, Walz said.
Winthrop hasn’t taken the dive in revenue they’d feared from COVID, Winthrop Mayor Sally Ranzau said. Retail sales tax and hotel/motel tax are all meeting the 2021 budget at this point. In fact, tax receipts for the first month of the year are almost 23% above budget projections, Ranzau said.
People who spent more time at a vacation home in the Methow were also shopping locally, she said.
As of the Feb. 28 report (the reports are a month behind, so these numbers are for January), Winthrop had collected $80,000 in sales tax in 2021, compared with $66,000 in 2020 and almost $60,000 in 2019. Ranzau said she’s using 2019 for comparison, “since 2020 wasn’t a normal year.”
Total sales tax in Winthrop has increased from $339,000 in 2016 to $436,000 in 2019, according to FIT. Sales-tax collections for February are almost twice what Winthrop took in 10 years ago, when tax revenue reported at the end of February was just $42,000, according to numbers from the town.
The hotel/motel tax collected by Winthrop as of February has been pretty constant over the past three years, ranging from 12% to 14%. It’s too soon to see the impact of the summer tourist season.
Even an uptick in online sales could benefit Winthrop, since sales tax for online and mail-order sales is now paid to the destination address, following a 2018 U.S. Supreme Court ruling.
Property tax
Winthrop has another distinction if you consider all taxes, including property tax. The town is No. 1, at 87%, for the proportion of the town’s total revenue derived from all taxes, according to FIT. That figure shows the importance of taxes to governmental operations in general, Walz said.
There’s no clear pattern to the other towns and cities that get such a large percentage of their revenue from taxes. Tiny places like Spangle, in Spokane County (which has half the population of Winthrop), and larger places (with high property values) like Port Townsend are just below Winthrop in the rankings.
Okanogan County gets about 60% of its revenue from property taxes, Okanogan County Assessor Larry Gilman said. Winthrop’s share of property taxes from the county is about $200,000 (16% of people’s property tax goes to the town). Twisp gets $209,000, or 18% of property-tax payments, Gilman said.
FIT is built so people can look up information and compare and contrast cities across the state. It can help mayors and town councils see if they’re spending more on things like public safety or recreation, compared to similar communities. “To me, it’s one of the coolest things we did,” Walz said about FIT.
While property tax has been going up in many municipalities, sales and utility taxes have been slowly overtaking property tax as a source of revenue, Walz said.
