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Sales tax stays on upward trend

For the third straight month, the Colorado Department of Revenue (CDR) has provided positive news for Archuleta County’s economic situation, showing a 3.79 percent increase for July sales tax collections compared to the same month last year.

According to Monday’s CDR report of town and county sales tax collections, six out of the last seven months have shown positive sales tax collections relative to the same months in 2010. Year to date, sales tax revenues in the area are up 6.6 percent compared to year-to-date collections accumulated last year.

However, it is unclear if the positive year-to-date numbers in Monday’s report indicate a boost in this year’s sales tax collections or if the numbers are due to circumstances unrelated to an apparent economic upswing.

“It looks like we’re essentially flat from the previous year,” said Pagosa Springs Town Manager David Mitchem. “But at least we’re not in a downturn from last year.”

“We’ve had a unique cash flow situation,” Mitchem continued. “If you take that into account, the numbers are relatively flat compared to last year’s collections.”

Mitchem was referring to an audit performed by the CDR that added in previously uncollected sales tax into the 2011 revenue stream, perhaps artificially inflating 2011 sales tax revenues. Those additional tax revenues showed May collections up 24.38 percent and June up 13.16 percent — around $175,000 additional for those two months.

However, July showed no additional revenues due to audits, yet those collections were up 3.79 percent, indicating growth for that month compared to the same time last year.

In fact, it is not known if CDR audits and subsequent collections occurred during 2011 or during 2010 (CDR officials would not comment regarding collections due to state confidentiality laws). Mitchem stated that, while he didn’t know the time period of additional CDR collections (which would either indicate a more robust 2011 or relatively flat collections), as town manager he chose to take a more conservative approach and regard the additional funds as an unplanned-for windfall.

Nonetheless, Mitchem added, “The downturn we’ve seen the past two years has seemed to have subsided and now, we’re seeing some stability.”

The overall numbers appear to support Mitchem’s analysis regarding a slight rebound from the area’s economic slump.

July (traditionally the best month for sales tax collections in the area) of this year, while not great — it was outperformed by the same month in 2006, 2007 and 2008 — nonetheless fared better than July in 2009 and 2010. In fact, taking an average of July collections between 2006 and 2010 shows July 2011 down just .59 from the five-year average.

Unknowns aside, 2011 year-to-date collections are down 1.1 percent from a five-year average of year-to-date collections spanning 2006 through 2011.

While Mitchem prefers to base economic forecasts for the final two quarters of this year on an assumption that growth is flat, he concedes to a point made by Archuleta County Finance Director Diane Sorenson, regarding Monday’s report. Sorenson pointed out that several market sectors showed either no collections or low dollar values during some months in 2011, but significantly increased collections during other months. Furthermore, she pointed out collection numbers for some market sectors that traditionally pay no sales tax in the county.

“That just doesn’t make sense to me,” Sorenson said. However, Sorenson was unable to say if May and June increases in revenue from previous audits accounted for sales tax due in 2011 or 2010.

If sales tax collections are indeed flat during 2011, that would mirror recent news for retail sales on the national level.

Yesterday, the U.S. Commerce Department reported that retail sales in the U.S. were flat in August relative to the previous month, most likely due to continued high unemployment and consumer uncertainty with the economy.

Retail sales accounts for about 70 percent of the U.S. economy. The Town of Pagosa Springs relies on sales taxes for a little more than 70 percent of its revenue stream. Sales tax amounts to less than 30 percent of the county’s revenues.

Next month’s CDR sales tax report could provide a clearer picture of the area’s economy this year while sales tax figures for September (reported in early November) would indicate growth in 2011 would point towards the direction the local economy is taking — if positive numbers follow a robust August.

Until then, while the sales tax figures suggest a positive economic outlook for Archuleta County on the surface, a degree of caution is necessary when looking at the overall numbers.

At the moment, the forecast appears cloudy but not stormy. The following month’s reports may well indicate a sunnier forecast than previously suspected.

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