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HdL Sales Tax Report for CY2023 Q4 Saleswww.hdlcompanies.com | 888.861.0220 Q4 2022* Q4 2023* Legend $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 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 Food and Drugs Autos and Transportation Building and Construction Business and Industry TOP 25 PRODUCERSCITY OF ENCINITAS HIGHLIGHTS Published by HdL Companies in Spring 2024 SALES TAX UPDATE CITY OF ENCINITAS 4Q 2023 (OCTOBER - DECEMBER) 7 Eleven 76 Alila Marea Beach Resort Encinitas Best Buy Cardiff Seaside Market Chevron Dick’s Sporting Goods Encinitas Ford Hansen Surfboards Herman Cook Volkswagen Home Depot Home Goods Pacific Coast Grill REI Scotty Cameron Gallery Sephora Shell Car Wash & Detail Target TJ Maxx Total Wine & More Trader Joe’s Valero Vons Vuori Walmart Supercenter During the period from October to December, Encinitas experienced a decrease in receipts by 8.8% compared to the fourth sales period of 2022. Excluding irregular reporting instances, sales saw a more significant decline of 12.4%. The relocation of an auto- transportation vendor to another jurisdiction within the past year was a major contributor to this downturn. This loss had had the additional compound negative effect of a reduction in the City’s share of the countywide use tax pool, as these funds are distributed among local agencies based on their proportional cash receipts each quarter. Furthermore, there was a decrease in business-industrial receipts, reflecting a nationwide trend of reduced manufacturing and business activity towards the end of the year as indicated by tracking indices. Sales of sporting goods, bikes, family apparel, home furnishings, and other retail items also declined, with consumers shifting their discretionary spending away from tangible goods towards leisure, travel, services, entertainment, and restaurant expenditures. Additionally, food and drug sales decreased as consumers redirected their spending from alcohol purchases for home consumption to dining out. In comparison, taxable sales for all of San Diego County decreased by 1.2% in this same time period, while the Southern California region experienced a decline of 2.0%, net of irregularities. TOTAL:$ 4,063,028 -12.4%-1.2%-2.5% COUNTY STATE ENCINITAS 4Q2023 TOP NON-CONFIDENTIAL BUSINESS TYPES Q4 '23* EncinitasBusiness Type Change Change ChangeCountyHdL State -4.9%-1.2%3.5% 372.1 Service Stations 1.8%1.1%0.6% 365.3 Casual Dining 0.4%2.1%-3.7% 184.6 Quick-Service Restaurants -7.1%-7.0%-6.0% 176.5 Sporting Goods/Bike Stores -4.6%-7.0%-4.3% 168.9 Grocery Stores -2.1%2.2%3.1% 137.5 Specialty Stores -0.4%0.5%-13.8% 125.9 Family Apparel 1.6%3.1%0.4% 123.6 Fast-Casual Restaurants -7.7%-10.2%-8.6% 121.1 Convenience Stores/Liquor -10.1%-10.1%-7.0% 109.9 Home Furnishings *Allocation aberrations have been adjusted to reflect sales activity *In thousands of dollars REVENUE BY BUSINESS GROUP Encinitas This Calendar Year* 18% Pools 19% Restaurants 10% Autos/Trans. 7% Building 4% Bus./Ind. 24% Cons.Goods 8% Food/Drug 9% Fuel *ADJUSTED FORECONOMIC DATA SALES TAX UPDATECITY OF ENCINITAS4Q 2023 STATEWIDE RESULTS California’s local one cent sales and use tax receipts during the months of October through December were 2.5% lower than the same quarter one year ago after adjusting for accounting anomalies. The fourth quarter is notably the highest sales tax generating quarter of the year and exhibited diminished year-over-year returns as consumers balanced higher prices and financing costs with essential household needs. Higher interest rates impacted the auto- transportation sector, especially luxury vehicles, as the group dropped 6.2%. Inventories for many dealers returned, creating downward pressure on prices, further constraining receipts. Lenders have tightened credit standards, making loan financing challenging. Improved leasing activity was the lone bright spot. With slow movement expected by the Federal Treasury setting interest rate policy, future revenue growth may stagnate. Fuel and service stations contributed a similar downturn, as lower fuel prices reduced receipts from gas stations and petroleum providers. While this has been the trend throughout 2023, recently global crude oil prices have been on the rise and should see growth in the coming year. This decline also impacted the general consumer goods category as those retailers selling fuel experienced a similar drop. During this holiday shopping period, general consumer goods experienced lackluster sales as results pulled back 3.4%. Most sectors saw reductions with home furnishings, women’s apparel, shoe and electronic-appliance stores being the most significant. Returns also marked the fourth consecutive quarter showing comparable declines. Similar to the anticipated trend of new vehicles, consumer spending may be sluggish in the near term. Even though revenue from most major sectors slowed, restaurant sales remained steady with a modest gain of 1.0%. Results from casual dining establishments grew during the early winter period as patrons enjoyed indoor dining. However, following the greater trend of consumers looking for value, fine dining eateries experienced lower receipts. The industry is still bracing for implementation of AB 1228, a new law increasing minimum wages for ‘fast food restaurants’, on April 1, 2024. Use taxes remitted via the countywide pools grew 1.0%, marking the first positive rebound after four consecutive quarters of decline. While overall online sales volume is steady, pool collections contracted with more taxes allocated directly to local agencies via in-state fulfillment and through existing retail outlets. Statewide, calendar year 2023 ended with a 2.3% decline from 2022. Elevated inflation and interest rates led to higher cost of goods resulting in consumers not spending as much as they had prior. Following multiple years of post-pandemic tax growth assisted by federal tax policy and temporary workplace accommodations, consumers reassessed their economic conditions and limited purchases. As the Federal Reserve considers delaying softening rates, consumer spending could likely stagnate delaying a return to the normal historical growth trend in 2024.