Sales taxes are collected by the State and distributed to the city.  The rate available to cities is made up of two components.  The first is .5%.  The second is also .5% of which .15% is provided to the county resulting in a total amount for cities of .85%.  There is a .01% sales tax for city criminal justice programs as well.

The overall tax rate in Lynnwood is 8.6%.  Therefore, the City receives 10% of the total tax collected.  Below is a graph which illustrates the distribution of the sales tax in 2000.

The retail sales tax is the most significant source of revenue to the City.  As a result, we have exercised a great deal of scrutiny of the retail sales tax base.  Below is a table that depicts the history of the sales tax and a forecast.

The retail sector includes such elements as automobile sales, retailers at Alderwood Mall and furniture.  Automobile sales is the largest sector while two anchor stores at the Alderwood Mall are the single largest contributors to the sales tax base.

Allocations to other Funds

Note: The allocation to Streets in 2000 was reduced in response to eliminating the overhead / administrative charge to the Streets Fund by the General Fund.

 Prospects for the Future – The regional economy has been very strong over the past several years.  As a result, the sales tax revenues have grown an average of 8% per year over the past three years.  A longer-term review of the sales taxes reveals an average of 3% (+/-) in annual growth over the past ten years.  Many economists are beginning to forecast a downturn in the economy.  Some of the growth of the last few years has come from new retail outlets.  The rate of retail expansion has slowed somewhat in 2000.

  Our budget is very reliant on sales tax, and our sales tax is dominated by cyclical / big ticket items.  These are subject to greater economic swings than most other sources of local government revenues.

We are basing a forecast for the year 2001 on the expectations of continued stable retail economy.  We have scaled back expectations of future growth to more traditional growth levels in keeping with conservative estimating and the predominant opinions of economists.

For the longer term, it would appear that Lynnwood will continue to attract commercial (and retail) interest.  Plans to expand the Alderwood Mall, develop / redevelop the central business district and discussions about major new office and specialty use projects continue to develop.  The ideal location at the junction of I-5 and I-405 along with improved freeway access has contributed to this growth.

This revenue source should not be impacted by proposed initiatives.