The Nyman Group


Restaurant Consulting Services

Scottsdale sales-tax collections up 7.5% in '11

Scottsdale's economy rebounded in 2011 with healthy increases in spending for cars, construction and the vital tourism industry.

Scottsdale's sales-tax collections totaled about $133.8 million last year, up 7.5 percent from 2010, according to figures released by the city.

It's a slow recovery, but local consumers are showing more confidence in their spending habits on everything from coffee to car buying. Plus, an uptick in tourism has fueled spending on retail, restaurants, golf and entertainment, according to city and business leaders.

"I don't know anyone who is jumping up and down," restaurant consultant Robert Nyman said of the recession rebound. "It's not like it was in 2006."

The local economy is a long way from the high-water mark around 2007 when sales-tax collections were approaching $180 million.

A recovery to that level could take more than five years, City Treasurer Davis Smith said.

But the improved numbers are sparking some optimism and job growth.

Small businesses are hiring again and consumers are spending money on vacations and business meetings, said Rick Kidder, Scottsdale Area Chamber of Commerce president.

"I think there is momentum," he said. "People are feeling that we hit bottom, and we're going to keep growing."

Among larger employers, Kidder is encouraged by the potential growth of Yelp, Fender, and West Pharmaceutical Services' Tech Group, which is based in the Scottsdale Airpark.

Yelp, the online consumer-review site with an office in downtown Scottsdale, had a successful initial public offering March 1, raising $107 million.

The Fender Musical Instruments Corp. recently moved its corporate headquarters from the Salt River Reservation to Scottsdale's Perimeter Center. Fender this month announced an initial public offering of its stock, said to be valued at $200 million.

Hotel rates increase

Tourism, an important driver of the Scottsdale economy, showed strong improvement in 2011 with some welcome growth over the previous year in room rates, up 6.5 percent, and revenue, up 8.2 percent, according to figures from Smith Travel Research.

Sales-tax collections from hotels, separate from the bed tax, increased 3.8 percent to $6.9 million. And hotels are reporting good numbers this year as well.

Jesse Thompson, Hotel Valley Ho sales and marketing director, said the historic downtown property is having its best March ever with occupancy at 95 percent.

More business travelers are coming for meetings, are bringing along their spouses and children, and are spending more on things like golf, said Rachel Sacco, Scottsdale Convention and Visitors Bureau president.

"As the hotels fill up, it trickles out through the community in retail and restaurants," she said.

Restaurant tax collections increased 8.2 percent in 2011 over the previous year.

Nyman said consumers are prudent in their spending, but they are still going out.

"They're trading down" to restaurants that are "good enough," he said, for example going to Pei Wei Asian Diner instead of P.F. Chang's China Bistro.

Pei Wei is a lower-cost fast-casual restaurant operated by Scottsdale-based P.F. Chang's.

Construction pace jumps

Construction, with a 13 percent increase, showed the second biggest increase of the city's 11 tax categories.

That includes taxes collected on the construction of the $100 million Maravilla Scottsdale, a luxury senior community set to open by this summer near the Fairmont Scottsdale Princess resort.

Other taxable activity, a category that includes movie theaters and bowling alleys, showed the biggest jump at 15.7 percent.

"Construction is coming off an absolutely abysmal performance," City Treasurer Smith said. "It doesn't take much to move it up from the level it's been."

Automotive sales-tax collections, which had been running close to $23 million four years ago, have rebounded from a skid that hit $13.8 million in 2010. That figure jumped 10 percent last year to $15.2 million.

Miscellaneous retail stores, the city's most lucrative sales-tax category, brought it $21.9 million last year, an increase of 8 percent. That includes some fairly large stores with the exception of big-box retailers.

The only category that declined was utility collections. That reflected higher vacancy rates in commercial buildings, the city treasurer said.

In the current fiscal year, which ends in June, Scottsdale had forecast sales-tax collections of $87.9 million for the city's general fund. But collections are better than expected and could hit $90 million to $91 million, Smith said. He is forecasting collections of $97.3 million for the 2012-13 fiscal year.

"As with the rest of the country, we're coming out of the recession very slowly," Smith said.