May 2015 Sales Tax Revenue Increased less than 1% compared to May 2014

Collections of sales tax for the month of May totaled $378,264, an increase of $2,369, or 0.6%, compared to May 2014.  Year-to-date sales tax collections of $1,753,127 are $154,203, or 9.6%, greater than the same five-month period in 2014.

The May 2015 sales tax collected by businesses engaged in retail trade, which comprises approximately two-thirds of Salida’s total sales tax, increased 3.7% compared to May 2014. The next largest industry group is restaurants with nearly one-sixth of the total; sales tax reported by this group of businesses decreased 4.5% in May. Sales tax collected by hotels, motels and vacation rentals increased 1.8% in May. As a percentage of total collections, the lodging industry only accounts for about 5%; however, this group is also an indicator for the level of tourism that brings spending in other sectors, as well.

Staff believes cool and rainy weather may have influenced the level of business activity in May 2015. In addition, the City hosted the Colorado Creative Industries conference in May 2014, which had a positive effect on sales tax last year.

Of the total City sales tax revenue collected in May, $205,397 (54.3%) is restricted for capital spending, and $31,396 (8.3%) is restricted for maintenance, routine repair and upkeep of the City’s streets, sidewalks, curb, gutters, etc. in accordance with Ordinance No. 2014-28 approved in a special election in March 2015 but retroactive to January 1, 2015. The unrestricted portion of the City sales tax is $138,823 (36.7%). Currently, a shortfall in funding exists for the operations of public works and other City departments despite overall positive revenue trends because of the new restrictions in place directing funds to capital projects.

Salida’s share of the Chaffee County tax for May was $122,636, an increase of $5,832 or 5.0%. Year-to-date disbursements of $557,775 are $46,779, or 9.2%, greater than the same period in 2014. Chaffee County’s 2% sales tax is shared with the three municipalities within the county under a long-standing intergovernmental agreement. The allocation is based on motor vehicle registrations throughout the county, yielding Salida approximately one-quarter of the county tax. Businesses located in the Salida city limits collect just over half of the county tax.

Sales tax is the most significant source of revenue for government operations. Salida relies more heavily on sales tax than other Colorado municipalities according to data compiled by the Department of Local Affairs. In 2008, voters repealed the property tax in favor of an additional 1% sales tax to pay for the operation, maintenance and improvement of streets and other infrastructure. This changed Salida’s total sales tax from 2% to 3%, and provided substantially more funding both for capital improvement projects and maintenance activities, specifically for operating expenditures of the public works organization to maintain streets and other infrastructure. The re-allocation of these funds was the subject of a recent special election, and now 75% of the 1% sales tax can be used only for capital improvements of streets, taking those funds from the operating budget.

For the fiscal year ended December 31, 2014, City sales tax reached $4.4 million, a cumulative increase of 28.3% since 2009. For that same period of time, from 2009 to 2014, the City’s general fund operating expenditures increased by 15.6% to $5.0 million. The increase in operational spending was much lower than the growth in revenue over the same time period. Cash reserves in the general fund have nearly tripled from $1.2 million at the end of 2009 to $3.5 at the end of 2014. From 2009 to 2014, the City invested $5.4 million of the total city sales tax revenue into streets and leverages those funds with grants totaling $1.3 million. Total capital spending during this period was $15.8 million and included $4.0 million in grants.

Please review the full “Sales Tax Trend Report” for further details. Each month, City staff updates this report with the current sales tax data and other general fund highlights. In addition to data about sales tax, the most important revenue source for government operations, it includes total revenues and expenditures, cash balances and financing obligations.. The report can be accessed at a “quick link” on the bottom of the home page or through the financial documents page. The City Treasurer presents this report to the council during the second regular meeting of each month.

City staff strives to provide information that serves to educate and engage its constituents. Your questions and suggestions are always appreciated.