If the local and national economy appeared to stall in February, that roadblock did not appear to keep tourists out of Archuleta County as the Town Tourism Committee reported last week that February lodgers tax collections were up 19.14 percent from the same month last year with an increase of almost 30 percent over average collections for the past five years, the best February on record (since the lodgers tax was initiated in 2007).
However, that increase in tourism appeared to do little to lift the local economy. As reported in last week’s edition of The SUN, sales tax revenues for the area floundered in February, up just 0.53 percent from the same month last year. Subtracting out the nation’s average rise in prices (an overall increase of 0.4 percent in the month’s Consumer Price Index), February collections were up just 0.13 percent from the same month last year.
Indeed almost 20-percent rise in lodgers tax collections during February but nearly flat sales tax collections raises questions.
First of all, February’s 0.4 rise in the CPI — due largely to gasoline prices increasing 4.9 percent nationwide during the same month — appeared to have little effect on visitors’ decisions to seek out Pagosa Country as a destination. Yet, while gas prices did not appear to prevent tourists from spending a night or two in the area, a subsequent boost in prices across the board appeared to keep a vise on visitors’ wallets as well as hampering the spending habits of local consumers.
However, inflation did little to inhibit consumer spending throughout the rest of the country and (with inflation factored out of February consumer spending) numbers presented earlier this month showed a 0.7 percent rise from January and up a full 4.1 percent from the same month last year (after including inflation data from both years).
On Monday, the U.S. Commerce Department reported that March consumer spending held steady from initial numbers reported in February, an indication that U.S. households are more confident in the national economy behind stronger job creation and a levelling off of gas prices.
That boost in spending across the country was not felt in Archuleta County. As reported in last week’s edition of The SUN, in February the retail sector fell 1.1 percent from the same month last year, according to a report from the Colorado Department of Revenue (CDR) released early last week.
Another question concerns the impact of tourism on the local economy. According to last week’s CDR report, sales tax collections for Accommodation and Food Services sector in February was up just 0.96 percent compared to the same month last year. While the Accommodation and Food Services sector accounts for sales tax collections for both restaurants and lodging (which pays a lodgers tax on top of sales tax), a 19.14 percent increase in lodgers tax would suggest an almost 18 percent drop in business for area dining establishments for February 2012 compared to the same month last year.
In fact, when the TTC presented its plan for building amenities on Reservoir Hill last October, it posited that a 20-percent increase in tourism — well below what the TTC claimed as the “minimum outcome” of its plan — would result in an additional $117,000 annually in sales tax revenues.
With that additional revenue stream averaged across the year and adjusted for average performance, February’s 19.14-percent increase in lodgers tax should have resulted in the month showing sales tax collections 3 percent better than the same month last year, given the TTC’s assumption of sales tax revenues resulting from increased lodging.
Conversely, if the TTC’s assumption is correct, February’s lodging tax boost would mean that sales tax revenues were down 2 percent relative to the same month last year if implied benefits from increased tourism numbers apply but are subtracted out from total sales tax collections. However, with the area’s retail sector down 1.1 percent in February, that assumption would be half true, at best.
The claims the TTC made in October, regarding the benefits to lodgers tax collections and subsequent sales tax revenues resulting from the development of Reservoir Hill, were more ambitious than the increase exhibited in February.
In that presentation, the TTC claimed that a full buildout of proposed Reservoir Hill amenities would provide “expected results” of a 75-percent boost in tourism (measured by rooms occupied in local lodging establishments), with subsequent increases in annual sales tax ($441,000) and lodgers tax ($294,000) collections.
The “minimum outcome” expectations for that development would, the TTC claimed, result in a $294,000 annual increase in sales tax and a $196,000 increase in lodgers tax collections.
Given that 2011 was 6.84 percent better than 2010 in year-end sales tax collections and that the TTC reported 2012 lodgers tax collections were up 6.07 percent from the previous year, assumed increases posited in the TTC’s October presentation for “expected results” of a full Reservoir Hill build out would have put year-end sales tax revenues in 2011 up 14.29 percent and lodgers tax collections at an astounding 82.65 percent over the previous year.
The assumptions of potential increased revenues claimed in the TTC’s October presentation seem somewhat inflated given the apparent limited effect a large boost in lodgers tax collections had on sales tax collections in February. Nevertheless, drawing conclusions between the two numbers based on one month’s collections would be spurious and further analysis is required if claims made by the TTC in October regarding the potential financial benefits of Reservoir Hill development are to be substantiated.
However, an analysis of lodgers tax and sales tax collections conducted by SUN staff last year did not yield any direct correlation, with results showing that sales tax could be up substantially while lodgers tax was down or flat. Conversely, an increase in lodgers tax collections showed no effect on sales tax revenues.
At the end of the day, a near 20-percent increase in lodgers tax for February (which averaged over the past five years was shown to be the third worst month in lodgers tax collections) is good news for the area — especially, lodging establishments. However, any claims that a boost in lodgers tax collections provide a positive result in other sectors of the area’s economy should be accepted with a certain degree of skepticism — and a request that the relationship between lodgers and sales tax collections receive more inquiry.
Only after that inquiry is made can issues be addressed as to how the area’s number one industry — tourism — can better benefit other sectors of the local economy.