Colorado Springs sales and use tax revenue plunged a record 21.8% in April from the year before — but the drop was only about half of what city officials had feared.
Sales and use tax revenue is critical for the city, paying more than half the cost for public safety, roads, parks and other public services. April marked the first full month of business closures and other stay-at-home restrictions set by the state to stem the spread of the coronavirus. Because of that, city officials were anticipating sales tax revenue would fall by as much as 40% from a year earlier.
Colorado Springs Mayor John Suthers said the city will wait until it receives May sales tax numbers next month before imposing salary cuts to offset revenue declines.
"If you had told me a year ago that sales tax would decline in April by 21.77%, I would have be ready to jump off the Golden Gate Bridge," Suthers said. "Our modeling had indicated a 40% drop, so where we go from here depends on how quickly everything opens back up. If we have two more months like this, we would have a problem. We see May as being closer to March (down 13.1%) and the rest of summer down 5-10%."
The city transferred $3 million Tuesday from its reserves to offset the April sales tax decline and is expecting to make another $5 million to $6 million in budget cuts or reserve transfers during the rest of the year, Suthers said. The city cut nearly $20 million from its budget in April by deferring some construction projects and equipment upgrades, banning travel and imposing a hiring freeze.
"It's bad, but it could have been worse. We hope it (sales tax revenue) will continue to come back quickly," Suthers said. "Tourism is considerably less than a normal year and that will continue through late fall. What Thanksgiving and Christmas spending look like, I don't know, but if we still have 12% unemployment (the area's jobless rate was 12.3% in May), people won't be spending as they would have. If we get to December and sales tax is down only 5%, we will be pretty happy."
Collections from the city's sales tax were down 22.8% to $10.8 million, the biggest percentage drop in records dating to 1977 and the smallest monthly total in more than four years. Revenue so far this year is off 9.1% to $48.9 million. Revenue from the city's use tax, paid on equipment and other items bought outside the city, rose 2.3% to $617,329, one of the few bright spots in an otherwise dismal report.
The declines in sales tax revenue were widespread, with 11 of 15 categories monitored by the city's Finance Department falling from a year earlier. Hotels; clothing stores; and furniture, appliances and electronics each dropped more than 50%. Medical marijuana, grocery stores, commercial machine dealers and building material retailers reported the only gains from a year ago. Marijuana businesses and grocery stores were among businesses deemed essential and thus stayed open during the stay-at-home orders.
Other details from the report:
• Revenue from the city's tax on hotel rooms and rental cars in April plunged a record 74.3% to $140,310, the smallest monthly total in 18 years. Collections so far this year are down 39.9% to $1.1 million.
• Collections from the city's special tax for road repairs in April fell 21.8% and so far this year are down 9.4% to nearly $16 million.
• Special taxes for public safety and trails, parks and open space raised $2.85 million in April and $12.9 million so far this year.