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Good news on sales tax front

For the first time in nearly two years, Archuleta County and the Town of Pagosa Springs saw an increase in sales tax revenues for a second straight month relative to the same time last year.

While 2010 sales tax revenues are still down 2.81 percent for the year (compared to 2009) the decline has slowed considerably, suggesting that the local economy may have hit bottom and, like the national economy, could be headed towards a slow recovery.

According to a report released by the Colorado Department of Revenue on Monday, September 2010 sales tax revenues for the county and the town (who share a 50-50 split of sales tax collections) rose 1.18 percent from the same month in 2009. Last month, the CDR report showed a 3.25 increase in revenues.

The continued growth of the tourism sector in Archuleta County may have added to the positive sales tax revenue number. Preliminary numbers for lodger’s tax receipts reported on Nov. 3 — up 9.86 percent — have been revised, showing a 16.07-percent increase over the same month last year.

According to Town Tourism Coordinator Jennie Green, September’s lodger’s tax receipts increased 27.7 percent over 2008 and 13 percent over 2007, a year that had performed very well in lodger’s tax receipts.

“Two-thousand seven was, up until this year, the strongest in overall lodger’s tax collections,” Green said. “This year is on track to surpass that.”

Green said that year-to-date lodger’s tax receipts were up 8.56 percent over 2009 and 12.09 percent over 2007.

However, it is difficult to attribute a boost in tourism to positive sales tax receipts. While those receipts were up 3.25 percent in August, lodger’s tax receipts were actually down 1.4 percent during that same month. Conversely, the impressive 16.07 percent increase the TTC reported for September overshadows the slight 1.18 increase in sales tax revenues.

“We’re certainly pleased by the report,” said Pagosa Springs Town Manager David Mitchem, “and it looks like we’re headed in the right direction.”

Of course, two months of positive sales tax collections hardly constitutes a trend and a closer examination of the numbers tempers optimism regarding the report.

Relative to 2008, August and September 2009 had dismal returns, down 11.55 and 17.07 percent respectively. In fact, when revenues from 2008 and 2009 are averaged, 2010 is down 3.07 percent from the two-year average for August and down 8.3 percent for September averages.

Nonetheless, 2010 sales tax revenues have shown a slowing decline. For almost all of 2009 and into the first quarter of 2010, sales tax collections were in a steep decline, with year-to-date revenues down between 7 and 9 percent until April of this year (when sales tax receipts showed a 5.97 percent increase). Since then, declines in sales tax collections have steadily decreased.

The slowing decline in the area reflects the national economic situation which, at least with some indicators, has shown slight growth. On Monday, the U.S. Commerce Department reported that national retail sales rose 1.2 percent in October, the biggest jump in seven months, performing well ahead of the expectations of most economists.

Despite the news, most economists remain cautious as unemployment remains lodged above 9.5 percent for the 15th straight month.

Americans overall appear to be in step with economists. Results of a Gallup poll (conducted Nov. 4-7) released Tuesday showed 33 percent of respondents answering “Jobs/unemployment” when asked, “What do you think is the most important problem facing this country today?”

Thirty-one percent responded “The economy in general,” while only 9 percent felt the deficit was important. Those results are in line with a CBS News poll (conducted Nov. 7-11) which showed 56 percent of respondents answering “Economy/jobs” to the question, “What should new congress concentrate on in January?” versus just 4 percent answering “Budget deficit.”

Clearly, most Americans (along with many analysts) view unemployment and the economy as a bigger problem than budget deficits, especially in light of recommendations made by President Obama’s Budget Deficit Commission (released last week) which suggested deep cuts for entitlements and other discretionary spending.

Locally, the official unemployment situation for September was 8.9 percent, higher than Colorado’s 8.2 percent number but lower than the nation’s 9.6 percent average for the same month (which had not improved for October).

Unofficially, the actual number of unemployed in the county is difficult — if not impossible — to accurately count. First of all, neither the Colorado Department of Labor and Employment nor the Bureau of Labor Statistics calculate a U6 statistic at the county level. The U6 number includes the U3 number, all workers filing for or collecting unemployment benefits, but also includes workers who have given up looking for work or are working part time but desire full time work.

Secondly, self-employed workers usually do not qualify for unemployment benefits (having not paid into unemployment insurance). If construction accounted for 15 percent of jobs in Archuleta County in 2007 (according to a 2009 report by the Region 9 Economic Development District of Southwest Colorado), the county U6 number probably reaches 20 percent or more, substantially higher than the national U6 rate of 17.1 percent.

Apparently, the local unemployment situation has put a strain on social services and charitable organizations (see related article), suggesting a larger number of individuals and families struggling in the county. Yet, while unemployment was higher in August and September of this year (8.9 percent for both months) compared to the same months last year (7.2 and 6.7 percent, respectively), the increased sales tax revenues for those same months this year raises an interesting question: Who is spending the money that has led to an apparently improved economic situation and where are they spending it?

As stated previously, tourism could account for some of the increase, but August’s numbers (sales tax revenues up 3.25 percent, lodger’s tax down 1.4 percent) seem to contradict that conclusion. Likewise, with official unemployment numbers between 1.2 and 2.7 percent higher for those months than they were the same time last year, it could be asked if those who are surviving or thriving in this economy are really boosting the economy with increased spending.

Although increased sales tax revenues raises more questions than it answers, one thing is clear: those revenues have risen relative to the same time last year and, since April of this year, those revenues have indicated a slowing decline in the local economy.

What will be interesting to see is if those revenues continue to show positive growth through the last quarter of this year. If those numbers continue on a positive trend, the questions raised will remain unanswered, but one thing will appear certain: that the economy in Archuleta County is on the rebound from the bottom.

Regarding what sectors of the economy might be adding to the positive sales tax revenue numbers, Mitchem said that while tourism (and ancillary sectors) and manufacturing were performing well, there was an overall boost across most sectors.

“I think there’s a more optimistic atmosphere in the area over the last couple of months,” he said, extending that optimism to the town’s budget (currently at a 10-percent reduction).

“By the end of the year, we may be at a five-percent reduction, which would really free up our budget and expenditures for next year.”

jim@pagosasun.com