- Oct 23, 2020
The economic effects of the COVID-19 pandemic will be closely examined by Northbrook’s Board of Trustees in November as they begin the delicate process of budget planning for the next fiscal year. Data presented by Village staff to the Economic Development Commission (EDC) illustrated significant impacts from declining sales tax collections, increasing unemployment, and rising vacancy rates for commercial properties.
At the EDC’s October meeting, Village Director of Development and Planning Services Tom Poupard presented a detailed report on economic indicators including data collected during the summer. Not surprisingly, sales tax collections took a dramatic tumble when businesses were closed or limited operations in March, and that drop continued throughout the summer. For the first quarter of 2020 ending in March, total sales taxes fell by 28.8 percent compared to Q1 2019; in the second quarter, the difference from last year was -44.1 percent. Retailers of apparel and general merchandise were especially hard-hit, reporting declines in sales tax collections of 81.3 and 85.1 percent respectively. Budgetary adjustments made by the Village in April in response to the pandemic closely aligned with the sales tax fluctuations, reflecting an ability to plan for changes in that revenue stream.
Local unemployment rates have recovered somewhat from their peak this spring, but still remain far higher than pre-pandemic levels. Spiking from 2.7 percent in March 2020 to 15.1 percent in April, unemployment in Northbrook has receded to 9.7 percent as of August. Northbrook’s rates have run parallel to, and slightly below, Illinois’ statewide trends — and the state has not recovered jobs at the same rate as the national average.
Commercial landlords are also facing dramatic upticks in vacancy rates. Office vacancies rose from 13.6 percent at the start of 2020 to 16.2 percent. (For comparison, the 10-year peak in office vacancies was around 18.1 percent in early 2012.) Retail vacancies have also climbed to 4.9 percent. The market for industrial/flex space remains tight at 2.9 percent, although that sector has also seen a slight increase in vacancies.
Overall, the economic indicators reflect some stabilization from the early crisis of the pandemic shutdowns, but its effects will continue to be felt for at least the coming year. The challenges are especially hard for local retailers, already buffeted by competition from online shopping, and restaurants that have relied on outdoor dining to attract customers during the summer months.
The data underscores the importance of shopping local during the holiday season, in order to maintain a healthy stream of sales tax revenue as the Village looks ahead to budgeting and tax levies in the coming year.