Gig Harbor business revenue dips slightly, lagging behind state boom

Business revenues dipped slightly in Gig Harbor in the first quarter of the year, state tax figures show, trailing a statewide trend that was generally up.

Strictly retail businesses did better, though, showing a 3.45 percent increase.

Businesses in the city notched about $175 million in taxable sales between January and the end of March, the state said. That’s about 2 percent less than the same quarter of 2018.

The figures show Gig Harbor lagging behind the rest of the state, which increased sales by nearly 5 percent during the same period, reaching $39.4 billion.

In a quarterly report released last week, the state Department of Revenue attributed the overall improvement to strong construction growth statewide.

Retail trade, a subset of all taxable retail sales in the state, also increased by 4.6 percent to a total of $16.5 billion.

Taxable retail sales are transactions subject to the retail sales tax, including sales by retailers, the construction industry, manufacturing and other sectors. Retail trade includes sales of items such as clothing, furniture and automobiles, but excludes other industries, such as services and construction.

The slowing of commerce was reflected in City of Gig Harbor sales tax revenue, which dropped about 2.5 percent between January and July, to $3.9 million.

David Rodenbach, the city’s finance director, said the drop was not necessarily alarming, and could be the result of many factors that may not be immediately clear.

“If it had dropped by 10 percent, that would be alarming,” Rodenbach said.

In a six-year forecast presented to the City Council Finance & Safety Committee on June 17, city Rodenbach forecast a $1.2 million shortfall for the city budget in 2020, based on an assumption that tax receipts would increase by about 4 percent. That assumption has since been reduced to 2.5 percent.

A decline in new construction in the city could account for some of the recent drop, Rodenbach said. Construction materials are subject to sales tax.

Retail stores were doing better. The retail-only portion of business sales in Gig Harbor were actually up 3.45 percent, according to the state, reaching just under $92 million, compared to $88 million in the first quarter of 2018.

Some of the sales tax slump in Gig Harbor may reflect relocation of some business outside the city limits, said Warren Zimmerman, president of the Gig Harbor Chamber of Commerce.

“The area is continuing to grow and attract new businesses, but because of the lack of room to expand downtown, a lot of that growth is occurring outside the city of Gig Harbor,” he said.

Katrina Knutson, the city’s community development director, said there has been a dip in building permit activity since several large North Gig Harbor projects were competed in 2018. But there are more in the final permit stages now, so the numbers are expected to rebound later this year, she said.

“My permit reviewers have been on fire, there are so many projects in the pipeline,” she said.

Among projects soon to be approved, she noted, are 174 units at Courtyard at Skansie, 80 units at McCormick Creek and 81 units at North Creek.

“The pause we are seeing now may be one result of the residential development moratorium” that was in place for six months from February of 2018, she said. It takes time for development to get back on track once the process has been interrupted, she noted.

Up the road in Port Orchard, businesses did $136 million in sales during the first quarter of 2019, up 2.9 percent from the previous year. Retail sales alone were $81 million, up 2.36 percent.

In Pierce County overall, businesses notched $875 million in sales, up 11.3 percent — the bulk of it in services, wholesale and manufacturing. The retail portion was up 10.6 percent, to $346 million.

This story was originally published August 21, 2019 at 12:00 AM.