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Sales tax figures hint at improved local economy

A report released last week by the Colorado Department of Revenue (CDR) indicates that the Pagosa area has seen a slight improvement in sales tax revenues over collections in 2010, with the last half of 2011 showing a significant positive trend.

The monthly CDR report of sales tax collections in Archuleta County is the area’s key economic indicator, as it represents a percentage of total sales and business in the county.

The CDR report for December 2011 collections showed the month up 8.32 percent over the same month in 2010, with year-end collections for last year showing a 6.84, percent increase over a year previous.

However, as reported throughout 2011 in The SUN, several months showed additional income from the Transportation and Warehousing sector, probably due to audits, with December showing $3,342 in revenues from that sector.

If Transportation and Warehousing revenues are subtracted out from December, collections show a 7.8 percent increase from December 2010, while subtracting out total collections in that sector ($267,854) from year-end collections show 2011 up 2.32 percent over the previous year.

Although a 2.32-percent increase in collections might not seem like great news (but good news, nonetheless), it does indicate that the local economy is trending in a positive direction. That trend becomes clearer especially when looking at the last six months of 2010 and 2011.

That time period (and subtracting out Transportation and Warehousing revenues) shows the last two quarters of 2011 up 3.7 percent from the same time period in 2010, 1.4 percent better than total year-to-date numbers that do not include revenues from audits.

More than that, total 2010 collections were down 8.39 percent from the previous year, with total 2009 collections down .56 percent from 2008 — the year most analysts pinpoint as the first full year of the recession.

Thus, 2011 finished as being the first year showing an increase in sales tax collections in almost three years.

Last week’s report also shows changes in the local economy, with some sectors increasing in the overall share of sales tax revenues and others exhibiting a decreased influence on collections over the past eight years.

For instance, although sales tax collections from retail sales have accounted for the largest share of collections since 2004, that share has diminished every year since. Although the retail sector showed a 10.52 percent increase in 2011 collections over 2010, accounting for 45.4 percent of overall revenues, that sector represented 46.53 percent of total collections in 2010.

In fact, retail sales has shown a year-by-year decrease in the share of overall collections since 2004 when it accounted for 52.05 percent of sales tax revenues.

Conversely, manufacturing has shown a steady increase in its percentage of collections over the past eight years. Up 4.25 percent in sales tax revenues from 2010 and accounting for 5.1 percent of total collections in 2011, its share of overall revenues was 4.9 percent in 2010 and just 2.21 percent in 2004.

Not surprisingly, construction has diminished in its share of collections over the years. Accounting for almost 3 percent of collections through 2007, it dropped to just 1.6 percent of collections in 2011. However, sales tax revenues for that sector rose 6.26 percent in 2011 from the previous year, indicating a slight rebound locally.

Showing some peaks and valleys since 2004, the Real Estate and Rentals and Leasing sector showed a 24.6-percent increase in 2011 collections relative to 2010. According to the CDR, that sector represents timeshare, vacation rentals and campground payments.

As reported in the Feb. 2 edition of The SUN, 2011 year-end collections for lodgers tax were up 6.07 percent over 2010 (a year that showed record collections on its own), indicating a significant boost in tourism to the area. However, more “heads in beds” — occupied hotel rooms, vacation rentals and time-shares — would not account for the dramatic increase of sales tax collections in the Real Estate and Rentals and Leasing sector. More likely, that increase was due to a more robust rental market that grew in the shadow of increased foreclosures, a market in which previous homeowners were forced to become renters.

While several significant sectors showed growth in 2011, Accommodations and Food Service, the second largest contributor to sales tax revenues (16.5 percent of collections), showed a 2.41 percent decrease in sales tax collections, suggesting a slight decrease in the numbers of people dining out in Pagosa area restaurants and bars during the last year.

Nevertheless, although Pagosa residents might not have found much reason to celebrate with a night out on the town in 2011, the year-end numbers for sales tax collections suggest that the local economy is showing a slight rebound.

That rebound is reflected by area year-end unemployment figures which (as was reported in the Jan. 26 edition of The SUN) showed that 2011 finished slightly better than the 2010 year average, with figures in the last two quarters — much like the sales tax collection data — suggesting a continued positive trend.

In fact, the economic situation in Archuleta County mirrors an easing of economic woes on the national level.

Two weeks ago it was reported that the national unemployment rate had fallen to 8.3 percent, the lowest since February 2009. Furthermore, it was reported last week that first-time unemployment claims dropped below 400,000 again for the ninth straight week, to 358,000. Although first-time unemployment claims can be volatile from week-to-week, it was also reported last week that the average for the last four weeks (a more reliable measure) dropped to 366,000 — the lowest four-week average since April 2008.

Many analysts interpreted last week’s report as an indication that U.S. companies are ramping up hiring in 2012, while the massive layoffs that have hobbled the national economy since early 2008 have slowed considerably.

Tempering that positive news, the Federal Reserve announced three weeks ago that it expects to hold interest rates at near zero until the end of 2014 — well beyond the mid-2013 interest rate increase the Fed had previously projected. Last month’s announcement signaled the Fed does not expect the economy to complete its recovery from the 2008 crisis any time in the near future.

While acknowledging that indicators suggest a rebound in the U.S. economy, the Fed statement added that growth in the national economy was moving slowly and that the decision to hold interest rates at historically low levels was meant to hasten the recovery.

The Fed’s decision was supported Tuesday when the U.S. Commerce Department released figures for January retail sales that suggested both good news and an indication that consumer spending is still too sluggish to set the stage for rapid economic expansion.

Consumer spending accounts for about 70 percent of the U.S. economy.

While showing a significant increase in consumer spending from last January, Tuesday’s report showed retail sales performing slightly below forecasts set by economists in December.

All things considered, Tuesday’s U.S. Commerce Department report for January retail sales appears to be analogous to last week’s CDR report for sales tax collections in the county: Although an improvement from the previous year, there is still far to go before declaring a full economic recovery.

jim@pagosasun.com

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