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Sales tax down, windfall on the way

Archuleta County and the town of Pagosa Springs received some slightly bad news and some very good news on Tuesday afternoon as the Colorado Department of Revenue (DOR) released its report on sales tax collections for the town and county.

While the bad news continues for local retail sales — down 2.91 percent in July relative to the same month last year — the news is less bad than it was the same month last year.

However, the great news, buried in a footnote in Tuesday’s report, indicated that the town and county have received a windfall to the tune of $2,003,477 due to a state audit of sales tax receipts during the period of Feb. 1, 2003 through Dec. 1, 2008.

“It’s certainly welcome news to the county,” said Archuleta County Administrator Greg Schulte. “It’s unexpected and welcome news considering the difficulties with the economy.”

In a statement obtained by SUN staff and prepared for release at today’s joint town/county meeting (10 a.m. in the commissioner’s meeting room), Schulte stated, “After review of the information, it was determined by the DOR that an adjustment in sales tax proceeds was due to Archuleta County and the Town of Pagosa Springs. The adjustment due to the County and Town is $2,003,477.99. It was remitted to the County on September 11, 2010.”

According to that statement, the county and town will split those proceeds, each receiving $1,001,739 from the collections. Of that, both the town and county split proceeds between their various funds. The county will deposit $500,859.50 in both the General Fund and the Road and Bridge Fund, while the town will deposit the same amounts into their General Fund and Capital Improvement Fund.

As of press time Wednesday, it was not clear how either county or town officials would spend an unexpected windfall amounting to just over $1 million each.

“We will be mulling over what to with the money during the next few weeks,” Schulte said.

In early 2009, the county adopted a policy to develop a general fund reserve. According to the policy, the intent is to have $1.2 million (or 10 to 15 percent of General Fund expenditures) banked by the end of 2012.

When asked about that reserve, Schulte said, “We’re on track to do that as it is, but this makes achieving that goal a little bit easier.”

For the town’s part, several recent expenditures have been approved by Town Council that have dipped into both General Fund reserves and Capital Improvement fund reserves. Pagosa Springs Town Manager David Mitchem stated that the windfall would not be applied to backfilling those withdrawals from reserves.

“Our audit earlier this year indicated we’re in good shape as far as our reserves,” he said.

While both town and county officials will certainly greet the news of the windfall with a collective sigh of relief, the news of July sales tax receipts remains as a reminder that the local economy has still not experienced a turnaround.

Nonetheless, while sales tax collections are not nearly as good as local officials (or local businesses) would like them to be, they are also not as bad as they have been during the past two years.

Year-to-date, sales tax collections are down 4.43 percent from the same time period last year, whereas sales tax collections were down 6.84 percent year-to-date in July 2009, an indication that sales tax collections in the town and county are showing a slight rebound from the previous year.

July’s sales tax collections amounted to $621,895.44, down from $640,508.13 in July 2009 and from July 2008 collections of $659,482 — July 2010 is down 5.7 percent from the same month in 2008 (two months before the beginning of the global economic crisis).

Historically, the best July on record for sales tax collections was in 2006, with $663,464.22 added to town and county coffers, 6.2 percent better than the July 2010 numbers.

However, July sales tax receipts fell short of some expectations by local officials who hoped for a better report than the one presented on Tuesday. Despite anecdotal reports that the town and county had experienced brisk business during the month of July, Tuesday’s numbers indicate that local sales continue to lag behind a tourism economy that has shown growth throughout the year.

Last week, the Town Tourism Committee reported that lodger’s tax receipts are up 3.53 percent from July 2009 and up 8.69 percent for the year.

Despite negative numbers and revenue declines for the past three months, local officials have indicated that, while business remains in a slump, that trend is slowly improving from the previous year and the early months of 2010.

According to Mitchem, a recommendation will be made at today’s mid-month Town Council meeting (noon at Town Hall) to return to a 10-percent budget reduction from 2008 expenditures. In May, council enacted a 15 percent reduction in expenditures.

Asked if the over $1 million revenue windfall for the town had influenced that recommendation, Mitchem said that it had not, but was determined by the fact that year-to-date revenues had been below 5 percent for the past two months, 5 percent being the threshold for a mandated 10 percent reduction in the flexible budget policy that council approved in late 2008.

Stating the obvious, Mitchem said the windfall was, “Marvelous news.”

Indeed. And while over $2 million split between the town and county is nothing short of marvelous news, the continued slowing of revenue declines from the previous year should be met, if not with wild celebration, with measured optimism.