Taxable sales by Salida businesses were down 5.08% in 2009, according to a report by Finance Director Jan Schmidt. Overall sales tax revenues for the City were up for 2009, but still failed to meet expectations, forcing officials to make tough fiscal decisions.
Despite the downturn in sales, the City took in about $840,000 more in sales tax revenue this past year because voters authorized a tax rate increase from 2% to 3% beginning January 1. Total 2009 sales tax collections amounted to about $3.3 million, up from roughly $2.4 million in 2008.
The increase in the tax rate makes an apples-to-apples comparison between 2008 and 2009 tax collections somewhat complicated, Schmidt said. Taxable sales numbers can give a clearer picture of local economic activity.
Schmidt worked backwards from sales tax collections to calculate taxable sales. 2009 taxable sales amounted to about $116 million, while those for 2008 were roughly $122 million. 2007 taxable sales were nearly $117 million.
Salida also receives a portion of sales tax collected by Chaffee County. Salida’s share amounted to about $1.2 million in 2009, down $100,000, or 7.5%, from 2008.
Sales tax is the primary source of revenue for the City’s general fund. Because overall sales tax revenues this year were about 5% less than officials expected, some requests from the community had to be denied and some projects had to be cut. The chip seal project was scaled back and paving the public works parking lot was deferred, Schmidt said.
According to reporting by the Denver Post, sales tax collections for Colorado are down 9.4% for the first five months of the fiscal year, relative to the same period last year. The State’s fiscal year begins in July.
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Tax collections for Salida experience a two-month reporting lag. Businesses pay the State, which then calculates the share owed to the City and remits that amount. So the 2009 numbers actually reflect point-of-sale numbers from November 2008 through October 2009. Final numbers for the 2009 calendar year won’t be available until February.
Month-to-month comparisons of sales tax revenues are also subject to the vagaries of the collection process. Smaller businesses may submit payments quarterly, rather than monthly, for example. And vendors aren’t always punctual in submitting payments to the State; sometimes they pay for several months at a time to “catch up”. When larger businesses do this, aggregate sales tax statistics can appear skewed.
In a follow-up email, Jan Schmidt noted that each percentage point in sales tax collected translates (currently) to about $47,000. A 5% drop in collections relative to what was budgeted meant that roughly $235,000 had to be cut from projects this year.
Thus far, the City has made cuts in capital expenditures, but if the trend continues, we can expect cuts to operating expenses and/or staff cuts.