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Sales tax growth a positive sign for Wichita-area businesses

  • The Wichita Eagle
  • Published Wednesday, March 13, 2013, at 11:38 p.m.

Sedgwick County sales tax collections

Year% change from prior year

Source: Kansas Department of Revenue

If last year felt like a slightly better year for local businesses, that’s because it was.

Merchants of all kinds in the Wichita area saw more people walk through their doors than in recent years.

Sales tax figures from the Kansas Department of Revenue indicate that Sedgwick County businesses saw a collective revenue increase of 4.4 percent in 2012.

When an inflation estimate is added in, county businesses still saw an increase of 2.6 percent.

Christmastime sales in 2012 were up 3.7 percent over 2011, although when adjusted for inflation, the gain was closer to 2 percent.

Ken Stoppel, president of Building Controls and Services, had a flat 2012, but expects to see a significant turnaround in 2013 with a number of big projects, such as the new airport terminal, the Rhatigan Student Center, and an expansion of Hospira in McPherson.

The big news of 2012 was his move into the Fisher’s Transmission building at 1730 E. Douglas.

He bought the 22,000-square-foot building three years ago and took on the task of a historical renovation. It was a labor of love for the dedicated downtown-ophile, as well as providing the space to accommodate his cramped employees. But there were times during the recession that he questioned the wisdom of expanding.

“The fact that we made the move looks pretty courageous now that I look back at it,” he said, with a laugh.

Lagging the nation

The Wichita area clearly is taking longer to regain its stride.

Nationally personal consumption started growing again in 2010 and rose 5.0 percent in 2011. Sedgwick County sales tax spending was still falling in 2010, but did increase by 3.8 percent in 2011.

In 2012, Sedgwick County sales tax receipts grew by 4.4 percent, while national personal consumption spending rose 3.7 percent. Although sales tax revenue and personal consumption data don’t measure exactly the same purchases, the two figures give an indication of the pace of the recovery.

And this one mirrors previous business cycles, in which Wichita lagged the national economic cycles by 12 to 18 months. One of the key reasons, say economists, is that the customers of Wichita’s corporate aircraft makers tend to cancel orders after it becomes obvious a recession is happening, and then the aircraft companies wait to see how deep the recession will be before laying of thousands of workers. They start rehiring well after their customers start coming back to place orders. The number of aircraft workers today remains virtually unchanged over the past two or three years, down 11,000 from peak employment, according to the Kansas Department of Labor.

Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University, said Sedgwick County is rebounding, slowly, without much help from the corporate aircraft makers.

Wichita businesses are seeing a bump from the state’s agriculture sector, as strong prices and government insurance payouts are helping to mitigate the drought impact, as well the upswing in oil drilling in southern Kansas.

And, he said, people just seem to be coming out of their shells. Getting past the election helped, he said, but likely not enough to eliminate uncertainty for companies.

“The consumption side is an important driver for all the support sectors, so having the retail sales go up is definitely good,” he said. “The consumers are ready to start moving forward, but I’m not sure it can be sustained.”

He said that continued wrangling in Washington, as well as Topeka, on important questions of taxation and regulation, are forcing companies to wait.

“It’s very clear,” he said. “I’ve talked to a lot of people locally and they told me they will be very cautious moving forward.”

Cautious optimism

Who thrives, who survives and who fails depends on the sector and the decisions made at that business.

For many in construction, real estate, information, restaurant and retail, tough times continue. But others saw better times in 2012.

Les Eck, president of Rusty Eck Ford, said he sold more than 4,000 cars, about 3500 retail and the rest to fleets. That was a 10 percent gain, he said.

He is looking for another 10 percent this year, he said.

That’s a function of the local economy, he said, plus cutting prices, advertising and new products from Ford. He said that 65 percent of his F150 truck buyers get one with the V6 EcoBoost engine, which is engineered to give more power in a smaller engine.

“The thing that’s driving this market is new product and new technology,” he said. “(Ford CEO) Alan Mullaly is putting a lot of money into new product.”

QuikTrip company spokesman Mike Thornbrugh said his company has seen sales growth in Wichita, although he wouldn’t say how much. A lot of the company growth comes from new products, he said, such as the company’s larger Generation 3 stores that sell more fresh and prepared foods. The company built one at Kellogg and Hillside and announced plans for two more.

“A lot of success depends on how good of a retailer you are,” he said. “If you don’t change, then sales will be stagnant.”

Reach Dan Voorhis at 316-268-6577 or dvoorhis@wichitaeagle.com.

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