AE-03051

 

ANALYSIS OF RETAIL TRENDS AND TAXABLE SALES FOR

FAIRVIEW, OKLAHOMA AND MAJOR COUNTY

 

 

 

 

 

Suzette Barta, Extension Assistant, OSU, Stillwater

(405) 744-6186

 

Susan Trzebiatowski, Student Assistant, OSU, Stillwater

(405) 744-6186

 

Dana Baldwin, Ext. Ed. FCS/4-H and CED, OSU, Fairview

(580) 227-3786

 

Stan Ralstin, Area Community Development Specialist, OSU, Enid

(580) 233-5295

 

Mike D. Woods, Extension Economist, OSU, Stillwater

(405) 744-9837

 

 

 

 

 

OKLAHOMA COOPERATIVE EXTENSION SERVICE

OKLAHOMA STATE UNIVERSITY

 

 

 

 

 

 

 

                                                                      May 2003

Analysis Of Retail Trends And Taxable Sales For

Fairview, Oklahoma And Major County

 

 

Suzette Barta                             Susan Trzebiatowski                    Mike Woods

Extension Assistant                     Student Assistant                         Extension Economist

Room 527, Ag. Hall                   Room 527, Ag. Hall                    Room 514, Ag. Hall

Oklahoma State University         Oklahoma State University           Oklahoma State University

Stillwater, OK  74078-6026      Stillwater, OK  74078-6026        Stillwater, OK  74078-6026

sdb1113@okstate.edu               susanft@okstate.edu                    mdwoods@okstate.edu

 

 

 

Dana Baldwin                                                                               Stan Ralstin

Ext. Ed. FCS/4-H and CED.                                                         Area Ext. Comm. Dev. Specialist

500 E. Broadway, Suite 3 Courthouse                                           205 W. Maple, Suite 610

Fairview, OK 73737-2298                                                           Enid, OK 73701-4011

baldwdm@okstate.edu                                                                 ralstin@okstate.edu

 

 

 

 

                                                                    ABSTRACT

 

The goal of this paper is to provide an analysis of taxable sales for Fairview and Major County.  Basic data is used to provide estimates of trade area capture and pull factors.  Reported sales tax data is also used to analyze trends in the county and area.

 

 

 

 

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ANALYSIS OF RETAIL TRENDS AND TAXABLE SALES FOR

FAIRVIEW, OKLAHOMA AND MAJOR COUNTY

 

                                                              INTRODUCTION

 

Oklahoma communities have been concerned with all aspects of economic development for the past several years.   Creating new jobs and additional income is of concern to rural communities and urban areas alike.  Often, retailing is viewed as a "service" sector dependent on the "basic" sectors such as oil, manufacturing, and agriculture.  Export sectors produce goods and services sold outside the local or regional economy.  Service sectors tend to circulate existing local dollars rather than attracting "new" outside dollars.  The retail sector is important, though, as retail activity reflects the general health of a local economy.  Retail sales also produce sales tax dollars which support municipal service provision.  Many local communities are promoting a "shop at home" campaign to keep local retail dollars in the community.  It will not be possible to stop all out-of-town spending or sales leakage’s for a local economy.  Opportunities for improvement do frequently exist, however.  Key areas can be identified for improvement.  Analysis of retail trends can identify emerging trade centers.  Local leaders in Fairview requested the following taxable sales analysis.  The specific objectives of the study are:

1.    Utilize reported sales tax data to analyze trends in the county and area,

2.         Provide estimates of trade area capture and market attraction, and

3.         Provide estimates of market attraction, broken out by SIC code.

 

                                           METHODOLOGY AND DATA SOURCES

A trade area analysis model frequently used is "trade area capture."  Trade area capture is calculated by dividing the city's retail sales by state per capita retail sales.  The figure is adjusted by income differences between the state and relevant local area.  The specific equation utilized is:

Where:

TACc=Trade Area Capture by city,

RSc=Retail Sales by city,

RSs=Retail Sales for the state,

Ps=State Population,

PCIc=Per Capita Income by county, and

PCIs=Per Capita Income for the state.

 

Trade area capture figures incorporate both income and expenditure factors, which may be influencing retail trade trends.  An underlying assumption of the trade area capture estimate is that local tastes and preferences are similar to that of the state as a whole.  If a trade area capture estimate is larger than city population then two explanations are possible: 1) the city is attracting customers outside its boundaries or 2) residents of the city are spending more than the state average.

Trade area capture figures can be utilized to estimate the amount of sales going to outside consumers.  To do this a pull factor , which is a measure of an economy's retail sales gap, is derived using trade area capture figures and city population:

Where:

PFc=City Pull Factor, and

Pc=City Population.

 

 

A pull factor of 1.0 means the city is drawing all its customers from within its boundaries but none from the outside.  A pull factor of 1.50 means the city is drawing non-local customers equal to 50 percent of the city population.  A pull factor of less than one means the city is not capturing the shoppers within its boundaries or they are spending relatively less than the state average.  This is considered leakage of retail sales or a retail sales gap.  Additional discussion of trade area capture and pull factors can be found in the references cited in this report (Barta and Woods; Harris; Stone and McConnon; Hustedde, Shatter, and Pulver).  The Oklahoma Cooperative Extension Service has been conducting pull factor/gap analysis and sales tax analysis since 1991 (Woods, 1991).

City pull factors and trade area capture figures are calculated for fiscal years 1980 through 2002.  Data used were sales tax returns as reported by the Oklahoma Tax Commission.  These figures do not include all retail sales (only taxable sales) in an area but provide a proxy.  Population data were obtained from the Oklahoma State Data Center and were consistent with figures from the1980, 1990, and 2000 Census.  Income figures were taken from Bureau of Economic Analysis estimates for counties.  Similar income data for cities were not available so county income was used as a proxy.

 

                                                     TAXABLE SALES ANALYSIS

 

Sales tax returns as reported by the Oklahoma Tax Commission for Fairview are listed in Table 1 for the fiscal years 1980 to 2002.  Sales tax returns are important to a city because they reflect the general health of a local economy and also represent significant revenue for the city budget.  In FY 2002, Fairview collected over $842,000 in sales tax at tax rates of 3.0%.  Figure 1 plots estimated taxable sales for the same time period in both actual dollars and inflation-adjusted dollars. Sales are estimated from the sales tax returns and the sales tax rate that is reported.  The Consumer Price Index is used to adjust for inflation.  When taxable sales have been adjusted for inflation, Figure 1 shows that “real” sales declined from 1982 to 1990, but have been fairly constant since that time. 

Table 2 lists trade area capture figures for Fairview from 1980 to 2002.  The trade area capture for Fairview was at a maximum of 6,351 occurring in 1982.  This means that in 1982 Fairview “captured” the retail sales of 6,351 persons.  Figure 2 presents a graphic of these same trade area capture figures.  Note that this chart is very similar in shape to the one for inflation-adjusted or “real” sales.  Trade area has declined since 1982, although the last eight years have remained fairly constant.

Table 3 lists pull factors for Fairview for the years 1980 to 2002.  The pull factor for Fairview ranges from 1.185 to 1.740.  Recently, these pull factors have tended to be about 1.30. The interpretation is that Fairview is capturing the sales from its entire population, plus is attracting a number of out-of-town shoppers equal to 30% of its population.  A pull factor greater than 1.0 generally indicates that a town is attracting non-local shoppers.

Table 3 also shows the pull factors for other cities and towns in Major County with a reported sales tax.  Figure 3 presents this information graphically.  The communities of Fairview (population 2,733) and Ringwood (population 424) both consistently report pull factors greater than 1.0.  Even so, it is more likely that Fairview is the trade center for the county since it is the largest town in the county and is the also the county seat.  Meno (population 195) also has reached pull factors of very close to 1.0 recent years.  It is not uncommon to find very small towns with large pull factors.  It is nearly always the case that these towns will be home to a popular convenience store, truck stop, or restaurant that receives a lot of traffic from a nearby highway.  Also reporting for Major County is Ames (population 199) with pull factors that hover around the 0.60 mark and Cleo Springs (population 326) with pull factors that took a nice jump from 0.26 in 1997 to 0.51 in 1998. 

Figure 4 shows pull factors for 460+ cities that have sales tax return information available.  The pull factors are presented as a group average by city size.  The highest pull factors fall in the size categories 5,001 to 10,000 and 10,001 to 25,000 and 25,001 to 50,000 in population.  The smallest pull factors fall in the range for cities less than 1,000 in population.  Figure 5 plots Fairview’s pull factor compared to other cities with population 1,000-5,000.  Fairview posts pull factors that are consistently well above the average for other cities of similar size. 

	Table 1
Tax Returns, Fairview, Oklahoma, FY 1980-2002
	Year	Collections	Tax Rate
	1980	$197,102.72	1.00%
	1981(8)	$165,016.97	1.00%
	1981(4)	$158,161.22	2.00%
	1982	$630,595.41	2.00%
	1983(1)	$52,908.94	2.00%
	1983(11)	$745,983.22	3.00%
	1984	$763,702.87	3.00%
	1985	$782,865.56	3.00%
	1986	$687,965.43	3.00%
	1987	$628,806.05	3.00%
	1988	$615,163.82	3.00%
	1989	$597,539.95	3.00%
	1990	$602,116.73	3.00%
	1991	$625,245.08	3.00%
	1992	$736,892.80	3.00%
	1993	$690,606.98	3.00%
	1994	$720,361.88	3.00%
	1995	$692,640.22	3.00%
	1996	$706,862.71	3.00%
	1997	$749,333.34	3.00%
	1998	$769,702.91	3.00%
	1999	$725,652.06	3.00%
	2000	$754,110.02	3.00%
	2001	$829,183.21	3.00%
	2002	$842,130.95	3.00%
	(*) Denotes number of months of the fiscal year that sales tax was collected at the tax rate shown.

                                                                                                                                               

	Table 2
Trade Area Capture, Fairview, Oklahoma, 1980-2002
	Year	Trade Area Capture	Population
	1980	5,473	3,370
	1981	5,585	3,600
	1982	6,351	3,650
	1983	6,030	3,500
	1984	4,893	3,450
	1985	5,242	3,350
	1986	4,912	3,250
	1987	4,696	3,200
	1988	4,195	3,100
	1989	3,825	3,000
	1990	3,771	2,975
	1991	3,943	2,915
	1992	4,284	2,872
	1993	3,807	2,802
	1994	3,965	2,811
	1995	3,544	2,784
	1996	3,612	2,747
	1997	3,441	2,749
	1998	3,665	2,734
	1999	3,381	2,660
	2000	3,239	2,733
	2001	3,468	2,733
	2002*	3,551	2,733

* Based on 2001 BEA income data and 2000 Census

population data.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 3

Pull Factors for Cities and Towns in Major County

1980-2002