A CVS Pharmacy is being constructed on the NW corner of Alpine Hwy and SR92. This will add a convenient service to the local community plus provide additional jobs for residents.
How much can we anticipate that this will this impact our city budget? Good question. First we’ll need to estimate annual revenues. According to statista (a web site that publishes statistics from various sources) the average CVS pharmacy generated $8.6M in annual sales in 2013. Let’s be very optimistic and use $10M in revenues for our Highland CVS.
Next we will need to determine what portion of the CVS sales are OTC medicines and other retail good vs. prescription drugs (prescription drugs are exempt from sales tax). Rite Aid, another pharmacy, has a roughly 30/70 (non-pharmacy/pharmacy) split. After reading multiple articles it would appear that a 50/50 split would be very generous for non-pharmacy revenues. This means that the new store could generate $5M a year in taxable revenue. For Highland this would mean an additional $26,250 would go into in our general fund each year from sales tax. Although the local tax is 1%, only 50% of it comes directly to the city. The other 50% goes to the county and is divided among all the cities (27) of the county. To be generous I estimated that we would get 5% of the 50% we give to the county back.
Let’s assume that putting a building on this lot adds $5M in value to the property (I think I am being generous – anyone could correct me). That would mean an increase in property tax revenue of $8,405 per year ($5,000,000 * 0.0016810 – our city property tax rate).
My estimate is that the annual impact to the general fund will be $25,000 to $35,000. Our general fund budget for the current year is $7.6M.
Note, one of our residents (Lynn Warr) pointed out that I initially forgot to factor in the 50/50 split in local sales tax. Thanks Lynn. There is also a cost to the city for business growth that is a more difficult to calculate so I didn’t try.