The coronavirus pandemic slashed Colorado Springs sales tax and use tax revenue nearly 14% in March with April numbers expected to be even worse, Mayor John Suthers said last week.
The $14 million collected for March still included about a third of the month during which all retailers and restaurants were still open and attracting close to a normal volume of customers. Since March 16, restaurants have been only able to sell orders for takeout or delivery. All "non-essential" retailers were forced to close when Gov. Jared Polis issued a stay-at-home order March 26 that allowed only stores selling food, building materials and other limited categories to remain open.
"The March numbers were bad and they're going to get worse" in April, Suthers said. "At least we had 10 or 11 'normal' days in March that we won't have in April. There were a few encouraging things in March — a big increase in online sales — and we hope that the May opening of some retail will provide some better numbers for that month with an even bigger improvement in June."
The March numbers set several lows — the $14 million in sales and use tax collected for the month was the lowest since 2016 and the decline in sales tax revenue was the largest since December 2008 as the Great Recession slammed the city's biggest revenue source.
Collections of the city's tax on hotel rooms and rental cars fell a record 62.9% to $205,452, the lowest monthly total since February 2012.
The city has been preparing for bad sales tax news, cutting $20.8 million from its $331 million budget and making plans to cut another $18 million if the numbers for April come in significantly worse than expected, Suthers said. Those additional cuts would include across-the-board pay cuts of up to 6% and also include using $10 million from the city's reserves to shore up the budget and avoid even deeper cuts, he said.
"When we get the April numbers in early June and hear whether Congress will pass any revenue stabilization (legislation) for cities, we will be able to determine whether we need further cuts," Suthers said. "It will also be interesting to see what the tourism season will look like with the industry pivoting to attract more customers driving from the Midwest instead of flying here from the East Coast."
The revenue forecast for the rest of the year depends on how quickly customers return to shopping and eating at restaurants, and how the tourism season shapes up, Suthers said. He also said he may ask the Colorado Springs City Council to ask voters to set the city's revenue base under the Taxpayer's Bill of Rights at 2019 levels for several years to avoid revenue declines this year.
"If we are down 15% this year, it would take four or five years under TABOR to recover to the 2019 level, so we may ask voters to maintain the 2019 base so we don't suffer the ratchet-down effect," Suthers said.
Also in the sales tax report:
- Revenue from restaurants, hotels and auto dealers was down by nearly $1.6 million from a year ago with each category down at least 30% and hotels down 70%. Ten of the 15 categories measured by the city declined with the only major increases in business services, building materials, groceries (mostly from items such as cleaning supplies and disinfectants) and medical marijuana. Suthers said retail giant Wal-mart and liquor stores also were up significantly.
- Collections from the city's use tax, which comes from machinery and items bought outside city, fell 26.5% to $738,882 in March and is down 20.1% so far this year to $1.96 million. Sales tax revenue so far this year is down 4.3% to $38.1 million, so combined revenue from the two taxes were off 5.2% to $40.1 million. The city also collects special taxes for road repairs, public safety, parks, trails and open space that totaled $7.85 million in March and $22.4 million so far this year.
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