Sales tax revenue in Oklahoma City keeps coming in well above projections, and a leading local economist says it could be a sign the metro is on the verge of a transformative period of growth.
If that seems out of sync with an increasingly tenuous national and worldwide recovery from recession, that's because it is, said Russell Evans, director of Oklahoma City University's Steven C. Agee Economic Research and Policy Institute. But economic growth in the metro has been so strong for so long, evidence is mounting that Oklahoma City could be in the early stages of a big economic run largely independent of moody international markets.
Economists have suspected for a while that recovery, which typically features a higher than normal growth rate as an economy makes up for lost time, has ended in Oklahoma City. But Evans said a new normal rate of local growth can be higher than previously expected.
“I don't think you can write up this level of economic activity to a recovery phase,” said Evans, a research economist. “The question is, how long can it maintain that high growth rate? What we're seeing is that the numbers are still coming in awfully strong.”
Sales and use tax revenue in Oklahoma City has been far ahead of expectations every month this year so far, according to city figures. Through June, receipts are about what city officials they would be a full month later in July.
Strong growth was already expected in the metro as the area finished off its recovery from the recession with its roots in the 2008 financial and housing market collapses. But not this strong.
“You're still seeing tremendous growth in private earnings ... in spite of what continues to be modest U.S. activity at best,” Evans said.
Still, the city is proceeding cautiously. Based in part on research provided by Evans, the city planned its fiscal year 2013 budget on potential economic and revenue growth in Oklahoma City of about three percent, and officials are still sticking with that projection for now.
City budget officials have already told the city council they can expect on an extra $1.5 million in revenue next year, though an optimist can expect even more based on recent numbers. But the city would rather proceed conservatively and wait to make more major revenue projection adjustments for now.
“Moving more conservatively at a steady pace, more methodically, allows us to be more flexible,” city Finance Director Craig Freeman said. “If we do see a drop or it doesn't grow as fast as it has been, we're in a better position to respond.”
The city council can choose to spend unexpected surplus money during a fiscal year, as it did in September when voting to spend an extra $8 million from an overflowing rainy day fund on street repairs and improvements.
Oklahoma City has been helped by the worldwide growth in the energy sector, with global energy consumption showing no sign of slowing down. That local energy companies have maintained strong positions despite short-term negative trends is a sign the city's business foundation is sturdy, Evans said.
“We've seen strength in Oklahoma City through this spring even as oil prices have fallen, even as Oklahoma producers sell their oil at a discount on the global markets,” he said. “I don't think the activity in Oklahoma City is quickly swayed by modest movements in the core industry.”
Oklahoma City remains susceptible to outside forces like a financial collapse in Europe or a damaging blow to the dominant local employers — “the possibility is not zero, of course,” for something to derail Oklahoma City's future, Evans said.
But if local growth continues to exceed expectations, then expectations may have to be adjusted higher. Oklahoma City could be at a point similar to where Austin, Texas, was two decades ago, before explosive economic growth transformed the city.
“We're watching closely to see if Oklahoma City is going through a transformative period to a distinctly different metropolitan area on a very different growth path,” Evans said.