Colorado Springs sales tax revenues rose again last month as construction industry purchases remained strong and consumers ramped up spending heading into the holiday shopping season.
Sales tax revenues in December, which were collected on November purchases, climbed 8.4% to $15 million on a year-over-year basis, according to a report by the Colorado Springs Finance Department.
Revenues have risen each month since July, after a three-month decline that was attributed to business disruptions caused by the COVID-19 pandemic. Those recent revenue gains have pushed year-to-date sales tax collections to $158.7 million — down by just 0.2% from the same time in 2019.
Colorado Springs levies a 2% sales tax on consumer and business purchases of motor vehicles, appliances, TVs and other items. The tax is a key revenue source — funding more than half of the city's general fund budget that pays for public safety, roads, parks and other basic services.
"I track what's happening with local and state governments across the country," said Tatiana Bailey, director of the University of Colorado at Colorado Springs Economic Forum. "It's really amazing, for us, that sales and use tax has not taken the hit that it has in other municipalities."
The increase in city sales tax revenue for December was driven, in part, by a yearlong surge in the pace of local home construction. In December, the purchase of building materials generated almost $2 million in city sales tax revenue, a 43.6% year-over-year gain.
Nearly 4,500 permits — the most in 15 years — were issued in 2020 for the construction of single-family homes in the Springs and El Paso County. That demand for housing, in turn, was spurred by long-term mortgage rates that have fallen below 3%, a shortage of houses for sale on the resale side of the market and an influx of new residents to Colorado Springs.
Along with single-family homes, waves of new townhomes, apartments, hotels, stores and other construction projects have contributed to the growth in city sales tax revenues generated by building material purchases.
At the same time, the increase in December revenue could signal that the just-concluded holiday buying and selling season was a good one and might bode well for consumer purchases over the next few months, Bailey said. She added, however, that those consumer purchases could be offset by a slowdown in construction that often occurs during cold-weather months.
Revenues from purchases made through miscellaneous retailers — including online sellers and brick-and-mortar businesses such as sporting goods stores, craft and hobby supply stores, bookstores, pet supply stores and jewelry stores — totaled almost $2.5 million in December, a hefty 44% increase over the same month the previous year, the Finance Department report shows.
Of other retail categories with revenue increases, commercial machines climbed 22.2% to $256,356; grocery stores rose 21.6% to $639,283; business services gained 19.2% to $420,616; department and discount stores grew 4.1% to $1.4 million; auto repair and leases improved 2.5% to $613,427; and furniture, appliances and electronics inched up 0.4% to $818,957.
Other takeaways from the December sales tax report include:
• Among retail categories with revenue declines, hotels and motels plunged 48% to $303,446; restaurants dropped 15.9% to $1.5 million; utilities fell 8.1% to $242,401; auto dealers slid 6.5% to $1.2 million; and clothing stores sank 6.4% to $527,452.
• Revenues from the city's separate tax on hotel rooms and rental cars tumbled again, falling by nearly one-third to $313,743 on a year-over-year basis. Bed-and-car revenues — as the tax is commonly called — have dropped for nine straight months and is now down 40.2% for the year to $4.3 million. Declines in leisure and business travel because of the pandemic have hurt the lodging industry especially hard.
• The city’s use tax — paid by businesses on equipment they buy outside the city — rose 2.8% to $457,294. Year-to-date, use tax revenues are down almost 10% to $7.5 million.
• Revenue from medical marijuana sales rose 38.3% to $214,540.