City sales tax collections fall for first time in more than 2 years

A weak start to the Christmas shopping season in November ended a 25-month run of consecutive monthly gains in Colorado Springs sales tax collections, the Colorado Springs Finance Department reported Monday.

City sales tax collections fell 0.6 percent in December from the same month a year earlier amid weakness in clothing, department, discount and grocery stores as well as in the business services and tourism industries. Tax collected in December reflects November sales. The monthly decline is the first since collections fell in October 2009, though gains in the second half of 2011  had been weak with the exception of August, which reflected a burst of activity connected with the U.S. Women’s Open golf tournament at The Broadmoor.

Fred Veitch, vice president of Nor’wood Development Group, said managers at some of the retailers in Nor’wood’s First & Main retail and entertainment complex told him opening at midnight on Black Friday — the day after Thanksgiving and the traditional start of the holiday shopping season — may have backfired for some retailers.

“People bought the advertised specials and then went home to sleep instead of continuing to shop, so sales on Black Friday were down from preceding years is what I am hearing anecdotally from some of our retailers. With the extra weekend in before Christmas, they may have more than made up for it in December,” Veitch said.

Collections this year — the city measures sales tax from February through the following January to include collections from sales in December — are up 3.72 percent from a year earlier to $101.6 million, the best since the recession began but still $1.58 million below the peak level collected in 2007.

The latest numbers reflect an online survey by the University of Colorado at Colorado Springs of holiday shopping plans, which indicated that holiday season sales at best would increase between 2 percent and 3 percent, said Fred Crowley, senior economist for the Southern Colorado Economic Forum.

“The local job growth we are seeing doesn’t support much discretionary spending,” Crowley said. “The local economy is not very healthy and is flat at best.”

Collections of the city’s tax on hotel rooms and rental cars didn’t fare much better in December, declining nearly 3 percent from a year ago to $210,782, the first decline since May and the largest monthly drop since February. For the year, bed- and car-tax collections are up 6.49 percent from a year earlier to $3.77 million.

Use tax: Collections in December on manufacturing equipment, building materials and other items bought outside the city and used in the city were down 36.22 percent from a year ago to $444,230, the least of any month since May 2009.

Combined sales and use tax collections in December were off 3.26 percent from December 2010 to $9.02 million, through overall collections in the first 11 months of the year were still up 3.36 percent from the same period a year earlier. The December total included $47,088 in collections resulting from merchant audits; without those funds, overall sales and use tax collections would have declined 3.77 percent.

Why it’s important: Sales and use tax collections fund more than half of the city’s annual budget for police and fire protection, roads and other services. Sales tax also is a primary measurement of consumer spending, making it a key barometer of the local economy.

The breakdown: Categories with the largest increases in December included utilities, up 20 percent from a year earlier; auto dealers, up 11.84 percent;  and commercial machine dealers, up 7.22 percent. Categories with the largest declines included business services, down 21.19 percent; hotel and motel, off 12.57 percent; and grocery stores, down 10.54 percent. All categories but furniture, appliances and electronics are up for the year.

Medical marijuana: December collections of tax on medical marijuana and marijuana-infused products brought in $67,604, or about $6,200 more than the month before and the fourth-highest month.

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