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Sales tax down in 2009, but decline slows

Despite anecdotal reports by some local merchants of a strong finish in December sales, town and county December sales tax receipts were down 6.5 percent from the same month in 2008, according to a report released last Friday.

That same report indicated that local sales tax revenues were down 8.39 percent for all of 2009, compared to 2008.

Archuleta County and Pagosa Springs fared worse than the rest of the nation, as a report released last month showed that in 2009, the U.S. was down 6.2 percent in retail and food sales compared to 2008.

The good news is that national retail sales rose in the second half of the year, and a report released last week by the U.S. Commerce Department showed that trend continuing into 2010 with a .5 gain in January compared to December. Likewise, although local sales tax receipts for December showed a decrease from 2008, it was the second month in a row where the decrease trended less than 2009 average decreases — significantly lower than the average 8.17 trended decrease — and the third month in a row the revenue decreases have declined.

At the state level, sales tax revenues appear to be leveling out, as Colorado showed a 2.2 percent decline in January compared to the same month last year. However, according to Mark Couch, spokesman for the Colorado Department of Revenue, the state saw a 10.5-percent decline in sales tax revenues in 2009, compared to the previous year, a drop from $2.07 billion collected in 2008 to $1.8 billion collected in 2009. Given that significant decline, it is expected that the state Legislature will look at further budget cuts and tax revenue-generating schemes in an attempt to meet the state’s tax revenue shortfall.

Locally, the town of Pagosa Springs cut its budget by 15 percent last April in response to diminishing returns from sales tax revenues. Approved by town council last December, the 2010 budget projects a 10-percent decrease in sales tax revenues throughout the year.

At a 15-percent decrease since last April, the town managed to secure almost $1 million in General Fund and Capital Investment reserves during 2009. Staying at a 15-percent reduction, the town should be able to accumulate further reserves, especially if sales tax revenue decreases continue trending in a more positive direction.

Regarding the recent trend in diminishing sales tax revenues, Pagosa Springs Town Manager David Mitchem said, “We’re slowly inching in the right direction and we’re hoping that progress will continue.”

Still, Mitchem said that the town will continue with its 15-percent budget reduction. In a letter to the Pagosa Springs Town Council and town staff, Mitchem stated that the budget would not be revised in February and that staff should continue working within the 15-percent reduction.

The letter went on to say that the town would need to continue to curtail, “... most capital construction expenditures until mid-2010.”

While the town’s revenue stream is largely dependent on sales tax, accounting for more than 70 percent of town revenues, Archuleta County is not as dependent on those revenues, accounting for about 15 percent of total county revenues. As such, the county projected just a 3-percent decrease in sales tax revenues in its 2010 budget.

Archuleta County Administrator Greg Schulte agreed that sales tax revenue decreases appear to be leveling out, given the trend of the past two months.

“The question is,” Schulte asked, “at what point have you hit bottom?”

Pointing to the slowing decline in sales tax revenues, Schulte added, “The dramatic decreases that we’ve seen are behind us and if we do see further decreases, they won’t be as much as we’ve seen before.”

Local residents and businesses hope that Schulte is correct. While the U.S. Bureau of Labor Statistics reported last week that unemployment had fallen to 9.7 percent from December’s 10-percent unemployment figure, the BLS reported that unemployment rose in Archuleta County, from 6.7 percent in November to 8 percent in December (the figure is still preliminary). Barring correction, 2009 would have an average 7.6 unemployment rate for the county, the highest in 15 years.

However, that data fails to tell the whole story. Unemployment numbers only reflect the number of workers either collecting unemployment or who recently filed unemployment insurance claims — the so-called U3 number. What is not reported (because neither the BLS nor the Colorado Department of Labor compile the data) is the U6 number: the U3 number plus discouraged workers (workers who have fallen off unemployment insurance roles and have given up looking for work due to economic conditions), marginally-attached workers (temporary workers) or workers in part-time positions (who desire full-time work but are unable to find it).

Nationally, January’s U6 number fell to 16.5 percent after December’s high of 17.3 percent. Although impossible to determine what the local U6 number is, comparisons between local and national U3 numbers would suggest a countywide U6 number somewhat lower than overall U6 numbers in the U.S.

Furthermore, January continued to show an upward trend in the number of long-term unemployed (those jobless for 27 weeks and over), hitting 6.3 million last month.

Nonetheless, on the national level, indications of a recovery continue to flicker. Last month’s 22,000 job losses is a far cry from last January’s 770,000 job losses and for the second straight quarter, the GDP has shown positive growth — just over 3 percent this past quarter — compared to contracting at a rate of 6 percent at the beginning of 2009.

Locally, indications of a recovery are similarly suggesting a slow but steady turnaround. With the second straight month of sales tax revenues trending with declines below 2009 averages, the area economy could be rebounding with a slight, but gradually positive, bounce.

jim@pagosasun.com