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The City Café

For those interested in sharing ideas and perspectives regarding local government.

DOUG MACDONALD

Lately, many of you have asked us what the rising price of gasoline will do to your sales tax revenue forecast.  Using a few data points and simple assumptions, we can calculate the impact of a $1.00 increase in gasoline on our city 1% sales tax revenue on an annual basis (so a $0.50 increase would be half of the impact below) for a city whose population equals 100,000.

$1.00 gasoline price increase for a city of 100,000 people => ($ 449,531)

Since this is a population based estimate, if your population is 10% of 100,000 or 10,000, then the impact would be 10% of the ($449,531) loss or ($44,953).

A second possible way of estimating the impact is comparing today’s price to last year’s average.  Based on the average Salt Lake City gasoline price for the calendar year 2011 of $3.35, the current gasoline price last week of $3.63 was $0.285 higher so the impact would be ($128,116) loss in revenue if we compare to last year’s average (which swung from a high $3.65 in May to a low of $2.73 in January).

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