January sales tax collections jump 6.8 percent from year before

Colorado Springs’ economy got good news Wednesday: Last month’s city sales tax collections saw their biggest percentage gain in two years, reflecting what one economist said was a better employment outlook and stronger consumer confidence.

That news, however, doesn’t mean a change of fortune for Springs city government. The city would need many months of improved sales tax collections before it could take another look at the millions of dollars in service cuts that are in place in its 2010 budget.

“The first thing people tend to do is relax and say ‘well, we’re out of the woods’,” said City Councilman Sean Paige. “I think that would be a huge mistake. Personally, I’m going to continue to operate on a very tight budget basis.”

January’s sales tax collections rose 6.8 percent when compared with the same month a year earlier, according to the report Wednesday by the city’s Financial and Administrative Services Department. It was the third straight monthly increase in sales tax collections and the biggest jump since 7.2 percent in December 2007.

Sales tax collections are critical to Colorado Springs because they fund more than half of the city’s annual budget for general services, such as  police and fire protection, parks and roads.

January’s collections are watched closely because they reflect consumer and business purchases that were made in December, at the height of the holiday shopping season.

Consumer confidence is up from a year ago, accounting for increased purchases, said Fred Crowley, a University of Colorado at Colorado Springs economist who has said for months that the local and national recessions have ended.

Although employers aren’t necessarily adding jobs, the local unemployment rate has stabilized, he said.

The city’s January report showed increases in several categories of consumer and business purchases. Among them: Revenue from motor vehicle purchases rose 6.6 percent; furniture, appliance and electronics revenues climbed 4.8 percent; and clothing store revenues increased 3.4 percent.

Still, the numbers need to be kept in context. January’s collections are being compared with terrible figures from a year earlier. Even as January’s sales tax collections were up from last year, they’re down 6.9 percent from January 2005.

“It’s looking good, but when your head used to be in the mud before, anything looks good when you’re above ground,” Crowley said.

Combined sales-and-use-tax collections were up 7.5 percent in January from the same month a year earlier. The city levies a use tax on equipment and other items that businesses purchase outside the Springs for use inside city limits.

For all of 2009, however, sales-and-use-tax collections fell 5.1 percent compared with 2008, while the sales tax portion declined 4.6 percent for the year.

The plunge in revenues reflects local and national economies that tumbled into a recession in December 2007. The downturn forced Springs officials to slash tens of millions from their recent budgets. Among the 2010 cuts: 200 city employees have been laid off or retired early; 8,000 to 10,000 streetlights have been turned off; and four community centers will close in April unless money can be found to keep them open.

Paige said even if the city finds money for the community centers, he believes the city should continue to push for a plan to have them operate in a self-sustaining fashion and not be tied to budgetary ups and downs.

“We should assume that things are going to be tight for years to come,” he said.

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