I am presenting a more extensive report of sales taxes this month then I have in the past. Not only do I have the Grand Forks data and other major cities in the state for the month of July, but I also am presenting the first quarter 2014 state sales tax collections. Of course the time is different so we have to be careful in the analysis here.
That is, the first (top) table is taxes received by the cities in July. You will recall, if the businesses are forwarding the sales taxes they have collected from the consumers it should be for sales that occurred in May. The business then forwards the receipts to the state in June, and the state treasurer then sends the city that money on the 15th of July. That means on average the money the city receives was paid by the consumer two months earlier. The business got to use the money for about two weeks, and the state used it, or made interest on it, for six weeks.
As for the state sales taxes, the business gets use of the consumers tax payments for two weeks and then forwards it to the state for their immediate use. Of course the business acts as a collector of taxes and does not get paid anything for those administrative costs for being the governments.
An analysis shows the continuing slow down in the North Dakota economy. It is a slowdown that should be expected. It comes from two places. First, it is the maturing of the oil boom. Not a bust by any means, but a maturing of the explorations and an increase in the technology of drilling and the pumping. The costs of the wildcatting is now under control. This oil patch has to be the best organized, most efficient exploration ever. It has a success rate of well into the 90 percent category, a figure unheard of before.
The drilling and placing of the wells will go on for at least two more decades and longer if new technology is developed. This will be a development unlike any ever before, and that is good for North Dakota and for all of its sub-divisions, especially for some. It has taken some subdivisions that were disappearing from North Dakota history and turned them into some of the wealthiest in the state.
The second slow down is in the agricultural sector. The interesting thing for economists is that the oil boom, this never before seen level of economic activity in this state, and the nation is taking place at the very time that the largest, most extensive agricultural boom is also occurring. There may have been times when adjusted for the value of the dollar that farmers received more for their products in the past six to ten years, but there never has been a time when this level of prices lasted for this long of a period.
Not only that, but it was happening when new technology was happening at a level not only never recorded, but not ever imagined. Tractor horsepower increased from moderate levels to unimagined amounts. Satellite technology became common place on the farm, in the field. It was used to steer the tractors and combines, to set the machinery, to till, plant and harvest in ways unimagined not a decade before.
While at this time the boom has not turned into a bust, but it has created a significant slow down in the returns to the farms, and that has “multiplied” itself all the way across the state. Machinery sales are down significantly. Money for the farmers to buy business investments and personal purchases have declined significantly. So too then has the money received by the businesses, the carpenters, the car dealers, etc.
Not a bust, but a major slow down. It is a good thing the state has all that savings from the extra income from oil and agriculture this past decade.
Now, that all being said, the state is in a slowdown, but if you recall the last report by the OMB North Dakota government collections for its major taxes, after significant reductions by the legislature, is not slowing down. In fact collections are significantly greater than projected by the firm the state hires to tell them what to expect. It will take a major economic slowdown for the state not to have significantly more money than anticipated at the end of this biennium.
Given that places like Williston, Tioga, and Watford City actually are collecting less sales taxes than last year, but Dickinson is collecting more, and Fargo, as far from the oil patch as you can get, is collecting a lot more. No, more than a lot more.
Both Dickinson and Fargo are up about 17 percent from last year (for the first 6 months of 2014), and Fargo is over four times as large as Dickinson in terms of collections.
Finally, to my Grand Forks readers, I keep hearing how Grand Forks isn’t growing. I don’t know who is looking at what data to come up with that conclusion. Yes, it is slow compared to Fargo, but it is consistently ahead of last year in total, and in fact in every area. Some things like sales taxes are only up a few percent, but when we realize how our Canadian traffic, an important segment of the Grand Forks market, has slowed down because of their dollar when we look at the building, the employment, and other factors we need to be happy with Grand Forks economy. Grand Forks needs to keep two three letter words in mind: UND and UAV. While AGR is slowing down those two are increasing.
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