The early spring weather and sunshine that arrived in Pagosa Country this week appears even brighter and warmer with the delivery by the Colorado Department of Revenue (CDR) report Tuesday showing a continued positive trend in local sales tax collections.
The CDR reported that sales tax revenues for the county were up 6.45 percent in January compared to the same month last year and up 6.52 percent from average January collections for the past two years.
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.
January’s increase in sales tax collections reflects a positive trend in local revenues that began just prior to the start of the second half of 2011 (in June), which shows a 7.38-percent increase in June-through-January collections. However, that growth curve inclines steeply when looking at September-through-January collections, showing an increase of 9.12 percent over the previous year.
Overall, 2011 was 6.84 percent better than 2010 in year-end sales tax collections.
Given Tuesday’s report and the indication of a positive trend, Pagosa Springs Town Manager David Mitchem said, “I think we’ve seen the bottom of a difficult economy here and I’m encouraged by that.”
When asked if increased collections would lead to an adjustment in the town’s budget (sales tax revenues account for over 70 percent of the town’s revenue stream), Mitchem said, “We will continue with the council’s approved budget for this year.
“Actually, I don’t have any plans to change that at all this year,” Mitchem added.
In late 2009, the Pagosa Springs Town Council approved a budget policy that responded to a diminishing revenue stream with incremental cuts to expenditures, with the benchmark for budgeted spending set at 2008 levels. During the past two years, the budget has seen as much as a 15-percent cut to spending, but has largely remained at 10 percent from initial levels set with the 2009 policy decision.
With September-through-January collections showing an increase of 9.12 percent added to an existing 10-percent reduction in expenditures, the town realized nearly 20 percent in revenue surplus during that time period.
In the meantime, while salaries for town staff have been frozen for over two years, insurance costs for those employees and their families have increased by as much as $114 per month, despite no pay increase to help defer the expense of benefit costs.
Essentially, while town employees have been asked to take as much as an annual 4-percent cut in salary, town coffers have been bolstered by almost 20 percent, per month.
When asked if the town would revisit salaries for town staff, Mitchem said that council would wait to hear recommendations made by contracted consultants scheduled to examine those salaries sometime this summer.
Depending on the results provided by those consultants, Mitchem said any raise for town employees, “Wouldn’t go into effect this year, but that would impact next year’s budget.”
Mitchem added that, should sales tax revenues continue to indicate growth through the spring, council would most likely consider additional capital improvement projects during the summer.
Due in part to the 2009 budget policy (revised and reapproved last year), along with increasing sales tax revenues, the town has accumulated unprecedented cash reserves for both General and Capital Improvement fund balances (see related story).
Not only have those reserves exceeded the amount needed to operate the town for six months with zero revenues (an extremely unlikely scenario — six consecutive months of a 100-percent decrease in sales tax collections) — but Mitchem indicated late last year that the surplus would be used to leverage dollars for matches on potential grants.
As of presstime Wednesday, there was nearly $1 million in reserves above and beyond what is necessary to run town government for six months with a nil revenue stream.
Last year, when asked about those surplus reserves, Mitchem said that the excess cash banked by the town would be used as match dollars for potential grants, several of which Mitchem said the town would be investing this year.
While Pagosa Springs appears to be sitting in an unusually fortunate position as far as the local economy, that positive news reflects a national situation that suggests the U.S. economy is showing signs of renewed health.
On Tuesday, the Dow Jones Industrial Average closed at the highest level since 2007 on the heels of a Commerce Department report showing U.S. retail sales advanced 1.1 percent in February after a 0.4 percent gain in January.
Yesterday, European and Asian markets responded in kind, responding to signs that Europe’s debt crisis is abating and the U.S. economy is recovering faster than expected, while bolstering the value of the U.S. dollar in all markets.
In another sign of investor confidence in the nation’s economic performance, oil rebounded from the lowest price in almost a week, indicating that investors are betting that fuel demand will most likely increase amid signs the U.S. and Chinese economies are strengthening.
Finally, on Tuesday, the Federal Reserve revised its outlook from January, saying that it expects “moderate economic growth,” while predicting that the unemployment rate “will decline gradually.” In January, Fed policymakers had a more subdued assessment, saying that growth would be “modest,” while unemployment “will decline only gradually.”
Tuesday’s statement was undoubtedly formed following news that the companies had created an average of 245,000 net new jobs per month between December and February (see related article), along with the Commerce Department’s report showing a spike in consumer spending.
However, acknowledging that the apparent growth of the U.S. economy remains tenuous, Fed chairman Ben Bernanke said on Tuesday that previous policy would remain unchanged, pledging to keep interest rates at record-lows through 2014.
Fed confidence in the national economy mirrors Mitchem’s own cautious assessment of an apparent good start to 2012.
“Well, the weather may have had something to do with that,” Mitchem said regarding the numbers in Tuesday’s CDR report. “We’ve had a mild winter and that probably allowed people to get out and shop.
“However, I don’t think that was all of it,” Mitchem added, “and they’re good numbers, no matter how you look at it.”