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HdL Sales Tax Report for CY2023 Q2 Saleswww.hdlcompanies.com | 888.861.0220 Q2 2022* Q2 2023* Legend $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 SALES TAX BY MAJOR BUSINESS GROUP*Allocation aberrations have been adjusted to reflect sales activity General Consumer Goods Restaurants and Hotels County and State Pools Fuel and Service Stations Autos and Transportation Food and Drugs Building and Construction Business and Industry TOP 25 PRODUCERSCITY OF ENCINITAS HIGHLIGHTS Published by HdL Companies in Fall 2023 SALES TAX UPDATE CITY OF ENCINITAS 2Q 2023 (APRIL - JUNE) 7 Eleven 76 Alila Marea Beach Resort Encinitas Best Buy Chevron Dick’s Sporting Goods Encinitas Ford Hansen Surfboards Herman Cook Volkswagen Home Depot Home Goods IFE Marketing Pacific Coast Grill Ralphs REI Scotty Cameron Gallery Shell Car Wash & Detail Target TJ Maxx Total Wine & More Trader Joe’s Valero Vons Vuori Walmart Supercenter Encinitas’ receipts from April through June were 8.4% below the second sales period in 2022. Excluding reporting aberrations, actual sales were down 11.3%. General consumer goods saw weak collections at specialty, home furnishing, and electronic-appliance stores as consumers have some hesitancy about the direction the economy is going during this period. State-county pools, the City’s third largest revenue classification, was negative posting a 11.3% drop resulting from large declines in fuel-service stations and auto-transportation. Falling fuel prices that peaked in the second quarter of 2022 continue to compress services station profits. The latest departure of an auto- transportation merchant in this sector had begun to create dismal revenues. As patrons enjoy eating out, casual and fast-casual dining restaurants continue to benefit from positive gross receipts. The food-drug sector had strong revenues from grocery markets and drug stores. Likewise, the business- industry group saw modest growth by business service vendors. Net of aberrations, taxable sales for all of San Diego County declined 1.5% over the comparable time period; the Southern California region was down 2.9%. TOTAL:$ 3,998,864 -11.3%-1.5%-2.9% COUNTY STATE ENCINITAS 2Q2023 TOP NON-CONFIDENTIAL BUSINESS TYPES Q2 '23* EncinitasBusiness Type Change Change ChangeCountyHdL State 4.6%3.4%2.9% 378.3 Casual Dining -19.9%-17.6%-23.2% 371.1 Service Stations 3.1%3.7%-3.7% 185.6 Quick-Service Restaurants -9.2%-8.4%0.6% 173.4 Sporting Goods/Bike Stores 2.9%4.4%0.4% 168.9 Grocery Stores -1.0%0.0%5.0% 122.3 Family Apparel 3.7%4.6%2.9% 115.5 Fast-Casual Restaurants -1.2%0.4%-2.4% 112.9 Specialty Stores -5.2%-2.3%30.0% 107.7 Convenience Stores/Liquor -11.1%-8.2%-10.5% 107.4 Home Furnishings *Allocation aberrations have been adjusted to reflect sales activity *In thousands of dollars REVENUE BY BUSINESS GROUP Encinitas This Fiscal Year* 18% Pools 18% Restaurants 14% Autos/Trans. 7% Building 4% Bus./Ind. 23% Cons.Goods 8% Food/Drug 9% Fuel *ADJUSTED FORECONOMIC DATA SALES TAX UPDATECITY OF ENCINITAS2Q 2023 STATEWIDE RESULTS California’s local one cent sales and use tax receipts for sales during the months of April through June were 2.8% lower than the same quarter one year ago after adjusting for accounting anomalies. The second quarter of the calendar year was impacted by continued wet weather and a difficult comparison with the prior year, which experienced dramatic growth. The fuel-service stations sector contributed the most to this decline as year-over-year (YOY) falling fuel prices at the pump reduced receipts from gas stations and petroleum providers. Russia’s invasion of Ukraine and other world events during this period last year, pushed the global cost of crude oil to record highs. This dynamic also carried into general consumer goods as retailers selling fuel experienced a similar drop. Recently, OPEC and Russia have maintained production cuts having upward pressure on pricing again leading to future comparative growth. Sustained wet conditions further delayed projects, especially those from the prior quarter, hindering building-construction returns. YOY lumber price declines added to the pull back from building materials providers. Higher interest rates represent a significant headwind for the industry with potential impacts of limited commercial development activity, slowing public infrastructure projects and homeowners left unable to access equity for renovations. Despite a significant increase in new car registrations, revenue from autos- transportation fell by 1.4%. The improved activity can largely be attributed to rental car agencies restocking their fleets. However, these are wholesale transactions with sales tax charged upon rental of these vehicles. Weak demand for recreational vehicles, boats and motorcycles coupled with elevated overall financing costs remain challenges going forward. Use taxes remitted via the countywide pools decreased 0.75%, marking the third consecutive quarter of decline. While overall online sales continue to rise, pool collections dropped with the offsetting effect of more in-state fulfillment generated at large warehouses and through existing retail outlets allocated directly to local agencies. Restaurant sales were a bright spot as the summer season began. Although menu prices have flattened after a year of sharp gains, patrons are making more restaurant trips and are favoring spending their disposable income on experiences. Better sales by office material suppliers and enhanced investments of warehouse-farm-construction equipment contributed to improved returns for the business-industry category. Sales tax for the remainder of 2023 appears likely to follow the recent trend of moderate declines before leveling off in early 2024. Cooling consumer confidence and greater pressure on household budgets may lead to a lackluster upcoming holiday shopping period. Furthermore, the possibility of a longer and more pronounced slowdown in economic activity exists as the Federal Reserve considers additional interest rate increases to combat high prices that are already stretching consumer wallets.