HOMEBUILDING FILE PHOTO

Colorado Springs-area homebuilding and the purchase of construction materials by homebuilders have helped drive city sales tax collections, which rose a whopping 60.8% in May on a year-over-year basis, a new city Finance Department report shows.

Local COVID-19 numbers are down and city revenues are up — way up — as area consumers and businesses accelerate spending amid relaxed pandemic restrictions.

Colorado Springs sales tax collections totaled $17.3 million in May, a whopping 60.8% year-over-year jump, according to a report this week by the city’s Finance Department. May’s sales tax collections are based on retail activity that took place in April; revenues now have increased each month since July of last year.

On the one hand, May’s collections are being compared against last year, when sales tax revenues plunged because of COVID-19 limits on area businesses and the state’s stay-at-home order. As a result, the big increase in year-over-year city revenue isn’t necessarily surprising.

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But even when May’s collections are compared with the same month two years ago, city sales tax revenues are still up by nearly one fourth, the Finance Department report shows.

Several factors are at work, said Tatiana Bailey, an economist and director of the University of Colorado at Colorado Springs Economic Forum.

The area’s single-family housing market remains strong, and builders are purchasing construction materials and paying taxes on those items, she said.

Buyers, attracted by historically low mortgage rates, are stocking their new homes with appliances, furniture and other items bought from local retailers. Other homeowners are spending to remodel their properties.

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Newcomers, meanwhile, have moved to the area for jobs that pay livable wages, Bailey said. Online retail giant Amazon said this week it will hire 2,500 employees for its soon-to-open fulfillment center near the city’s airport.

“You put all that together and people have the income to buy the new houses even at the crazy prices, and everything that goes with it,” Bailey said.

Not only do employees have payroll checks to spend, but consumers have stimulus money from the American Rescue Plan, the federal government’s latest COVID-19 relief effort, she said. On Friday, the IRS said it issued another 2.3 million in payments this week in the form of $1,400 checks to eligible recipients.

Area residents also are eating at restaurants, heading to parties and attending weddings as they get vaccinated and COVID cases decline.

This week, the El Paso County Public Health Department said the county’s seven-day incidence rate as of June 4 had dipped below 100 cases per 100,000 people for the first time in seven months. The area’s positivity rate also has fallen below 5% and health officials say they’ve seen fewer hospitalizations and deaths.

“It’s great news from my perspective as an economist,” Bailey said of the latest city sales tax numbers. “It’s reflective of the fact that people are working, they’re making enough money, they feel confident.”

There are a few concerns on the horizon, she said.

Some builders say they’re slowing construction because they don’t have the materials and labor they need, Bailey said. Lumber and other construction material costs also have increased so fast that some builders worry they’ll lose money — agreeing to construct a home at one price, then watching as building costs soar.

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Inflation also could be a worry after the summer, she said.

For now, the Finance Department report shows:

• Several key retail categories saw double- and even triple-digit percentage spikes in sales tax collections on a year-over-year basis in May. Among them: clothing sales, 414%; miscellaneous retail — including online sellers, sporting goods stores, craft and hobby stores and pet supply stores — 136.1%; furniture, appliances and electronics, 105.3%; restaurants, 98%; auto dealers, 95.5%; building materials, 33.5%; and department and discount stores, 26.8%.

• The city’s lodging industry also showed signs of recovery. Sales tax collections from purchases at hotels rose nearly tenfold — to $529,886 from $55,921. Revenues from the separate tax on auto rentals and hotel rooms, meanwhile, rose 262.9% to $509,232 from $140,310.

• Revenue from the city’s use tax — paid on machinery and equipment that businesses purchase outside the city — climbed 8.6% to $670,133.

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