Retail sales are expected to remain relatively flat here next year, though they could rise or fall slightly, economic observers here say.

Randy Barcus, chief economist for Spokane-based Avista Corp., says he's more optimistic about retail sales in Spokane County next year than many of his counterparts in the community. Still, he expects sales-tax revenue to be flat.

The city of Spokane is budgeting for a 2 percent increase in sales-tax collections next year, while the city of Spokane Valley is projecting a roughly 5 percent decrease, and Spokane County is predicting a 3.9 percent drop.

Through November of this year, sales-tax receipts in the city of Spokane were down 2 percent compared with the year-earlier period, says city spokeswoman Marlene Feist. November receipts come from September collections, and as a consequence, the city has yet to see if any additional impact will result from the nation's more recent economic problems, Feist says.

Although the city has budgeted for a slight increase in sales-tax proceeds, it has made provisions for up to a 2 percent decrease, she says.

Barcus, of Avista, says there is a high likelihood that home buyers will be able to get remarkably low interest-rate mortgages because rates are down, and that in turn should lead to purchases of furniture and appliances and improve sales-tax collections.

"I expect the eventual outcome of the Detroit-based (automobile) company requests for assistance to be granted, and I expect buyers to return to showrooms. I especially expect this to occur after the majority of households in our country realize that we are not going to go into a depression, and they are not going to lose their jobs," he says.

"When Madison Avenue figures out how to pry this money (from paychecks) from the great majority, and I believe they will, we will see sales taxes rise, unemployment begin to drop, and the next business cycle will begin anew," Barcus says.

Bob Smith, vice president and chief operating officer for River Park Square in downtown Spokane, says, "We are planning for retail sales in 2009 to be flat. We're cautiously optimistic that we'll show an increase. We are just not sure where this economy will take us. We've held up pretty well so far, and we'll have to wait and see what transpires."

Carl Guenzel, of the Spokane-based commercial real estate concern Kiemle & Hagood Co., says retail development and leasing activities are going to be way down in 2009 compared with this year.

"The retail sector next year is going to be difficult. The first and second quarter are going to be the hardest hit times," Guenzel says. "I do see rental rates and land values coming down next year."

Retailers statewide are operating in a recession that presents business challenges second only to the Great Depression and are likely to see only a mild upswing next year, if any, says Jan Teague, president and CEO of the Washington Retail Association.