Construction crews work Tuesday on a home at The Sands housing project northeast of Constitution Avenue and Marksheffel Road on the east edge of Colorado Springs. The pace of local home construction fell nearly 16% in May, though building activity in the first five months of 2020 remains ahead of last year.

In what the mayor calls a "pretty amazing" turnaround, Colorado Springs sales tax revenue rose in June from a year earlier.

It's the first year-over-year increase since Gov. Jared Polis imposed restrictions on businesses across the state to slow the spread of the COVID-19 virus.

While the increase in June was less than 1%, that compares with declines of 3.3% in May, 21.8% in April and 13.9% in March, according to a report released Monday by the city's Finance Department. Nearly all businesses — including retailers, restaurants, gym, barbers and others — that had to close or severely restrict operations had reopened by June, though bars and nightclubs were ordered to close again starting July 1.

Colorado Springs sales tax revenue makes major recovery, but still down

Revenue from the city's 2% sales tax rose $157,000 to $16.8 million, with increased collections on building materials, vehicle sales and miscellaneous retail sales (which include online sales from Amazon and others) more than offsetting declines from hotels and motels, restaurants and commercial machine dealers, according to a breakdown by category in the city's report. Collections from both auto dealers and building material retailers were up more than 20%, while hotels and motels, still reeling from the impact of reduced travel amid the pandemic, were down more than 70%.

"Who would have thought after dropping more than 20% in April we would be back to basically even in June?" Colorado Springs Mayor John Suthers said. "It's pretty amazing that when you consider that the town is pretty dependent on tourism, especially during the summer, that with hotels down so much overall sales tax is still up. With a healthy tourism industry, sales tax would be up considerably."

Suthers credits the increase to local consumers continuing to spend normally on big-ticket items like cars. Surging home sales, which set records last month, also generate additional sales tax revenue as home buyers also buy appliances, furniture and other items for their new homes, he said. The local economy also benefits from a large local military presence, which hasn't been curtailed as much by government restrictions.

Colorado Springs sales and use tax revenue plunges at record level

The good sales tax numbers and a city hiring freeze, which has reduced the city's staff by 250 since the pandemic hit, has eliminated the need for more severe cost-cutting measures such as layoffs and salary cuts, Suthers said. However, city department heads have been told to carry forward budget cuts triggered by the pandemic through the rest of this year and into next year, he said.

That's because overall revenue from the city's sales and use tax and its tax on hotel rooms and rental cars, as well as special taxes for roads, public safety and trails, open space and parks, are down so far this year by nearly $11 million, or 7.3%, from a year earlier. All but the the tax on hotel rooms and rental cars are off 6.5%, but the so-called "tourism" tax is down 53% during the same period.

Colorado Springs sales tax revenue plunges amid pandemic

Other details from the report:

• Revenue from the city's use tax, paid on equipment bought outside the city, was down 12.8% in June from a year ago to $720,973, the highest monthly total this year. So far this year, use tax revenue is off 12% from a year ago to $3.89 million.

• Collections from the city's tax on hotel rooms and rental cars in June was down 64.1% from the record total in June 2019 to $324,927.

Contact Wayne Heilman 636-0234

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