Colorado Springs sales tax revenues rose modestly in February for the third straight month, a sign that spending by consumers and businesses might have slowed — though it hasn’t bottomed out.
“It hasn’t fallen off a cliff, but, definitely things are cooler than they were,” said Tatiana Bailey, a local economist and executive director of Data-Driven Economic Strategies, a Springs nonprofit.
A Colorado Springs Finance Department report released this week shows city sales tax collections last month totaled $16.1 million, a 1.4% increase over February 2022. The city levies its sales tax on the purchase of TVs, cars, furniture and other items; last month’s revenues reflect spending in January.
Year-over-year city sales tax revenues now have increased every month since July 2020.
But on a percentage basis, revenue gains totaled less than 2% each of the last three months after a string of double-digit gains early last year and during nearly all of 2021.
The Finance Department report shows some key retail sectors tracked by the city saw year-over-year revenue declines in February. Among them: building materials, 9%; furniture, appliances and electronics, 8.9%; utilities, 3.8%; clothing stores, 2.9%; and department and discount stores, 1.2%.
Long-term mortgage rates spiked to more than 6% in the second half of last year, and averaged 6.6% nationally this week, according to mortgage buyer Freddie Mac. Higher rates have priced some buyers out of the market and contributed to a sharp reduction in local home construction, some Springs builders have said.
That slowdown accounts for some of the revenue decline from building material sales, Bailey said. Also, fewer homes being built means fewer sofas, bedroom sets, refrigerators and the like are being purchased to stock them, she said.
Solid increases in other retail categories during February helped offset losses elsewhere, the Finance Department report showed. They included auto dealers, 14.2%; miscellaneous retail, 7.9%; restaurants, 6.9%; and auto repair and leases, 6.7%.
Even as consumer and business purchases have leveled off, city officials aren’t fretting because of the revenue gains from, among others, auto dealers, restaurants and miscellaneous retail, which includes online purchases, said Charae McDaniel, the Springs’ chief financial officer.
Colorado Springs’ sales tax pays for more than half of the city’s annual general fund budget, which includes spending on parks, roads and other basic services. The city’s use tax, levied on equipment and machinery purchased outside the Springs, totaled $931,213 in February and was up 40.8% on a year-over-year basis.
February’s combined sales and use tax revenues totaled $17.1 million — up 8.6% when compared with the same month last year.
“We are not, at this point, worried about our budget or where we stand as we move through the year,” McDaniel said. “The total sales- and use-tax percentage change is pretty much in line with what we had thought would be occurring and what we had planned for. So at this point, we are business as usual.”