Hang on. It’s going to be a bumpy ride.
This morning two things happened. The first was that Walmart announced it was closing 154 locations in the US (none in Utah, though). The second was that Fastenal, the foremost maker of parts used in construction, missed its earnings estimates.
Anytime Walmart decides to close stores, it tells us something. Either they’ve made a mistake and expanded too rapidly or the consumer isn’t spending (even at the lowest levels). Walmart doesn’t make a lot of mistakes and that’s why this is concerning. In this case, it appears they expanded a little fast with convenience stores but more generally it is signaling a further slowdown in sales across the country.
With Fastenal, their results somewhat aligns with the outlook for remodeling. Their profit was down 5.5% and their sales were down 0.4%. If this happens again next quarter, it will likely signal a real slowdown in fixing up houses.
So, why does any of this matter? Park City and Summit County governments (including the school district) get money from three primary sources: property taxes, sales taxes (including resort taxes), and building/construction related fees. If Walmart is saying that things are so bad that they have to close a number of stores, we should be listening to that. If Fastenal results show that people aren’t remodeling/building like they used to, we should listen to that too.
This means that sales taxes in Summit County could very likely be down in 2016. It also means that revenues from building fees will likely be down in 2016 (construction was already down in Summit County in 2015 but up in Park City). That leaves property taxes as the sole hope for revenues to stay at existing levels. Since statements from real estate agents likely indicate that property values are not increasing dramatically, it’s likely that only through continued building will property tax revenues rise. Perhaps Park City Heights, East Creek Ranch, and Silver Creek Village (residential developments) will continue expansion and thus provide more revenue.
It’s not lost on me that Summit County and Park City are complex entities. Sales taxes come from not only our stores, but our hotels, and resorts. As for property, we likely have enough acres available for building in Summit County, that if built, could fund us for a long time.
That said, it truly feels like a slow down is happening. That slow down will not only affect us individually but on a government level as well.
It should be an interesting 2016. The last few years have shown an uptick in money available to our local governments. It will be interesting to see what decisions are made as that starts to contract. That event may be at our doorstep.