Up just slightly from November 2009 — .51 percent — November 2010 sales tax collections indicate a continuing trend in the county and town economy that the precipitous free-fall in local revenue is beginning to level out and could be showing signs of a slow and sluggish recovery.
However, the worst does not appear to be over and, while November’s number is positive by all accounts, a larger look at sales tax collections in recent years indicate that any optimism should be taken with a heaping spoonful of caution.
While sales tax collections (a leading indicator of the overall economic health of the local economy) remain slightly down from the same period last year, the rate at which those collections has declined has shown a significant deceleration, indicating at least that bad economic news is not hurtling at local area businesses with the force that it had during the same period last year.
As of November 2009, sales tax collections had decreased by an average of 8.34 percent per month (across 11 months) and year-to-date collections were down 7.03 percent. In comparison, month-to-month average declines in 2010 (as of November) were just 2.43 percent, with year-to-date collections down 2.56 percent.
In fact, with five of 11 months in 2010 showing positive growth (up from the same month the previous year) and only two positive months in 2009 (with one month — January — arguably an anomaly due to the effect of the previous year’s storms), most indications suggest that the brakes have been applied to the sustained decline in sales tax revenues over the past two years.
Unfortunately, pulling back to look at a larger examination of the economy in Archuleta County shows a picture considerably less sanguine than what is presented in a month-to-month and year-to-year analysis.
Averaging sales tax collections, from January through November, for the past five years shows an economic decline that should be troubling to local officials. While 2009 receipts were off -4.67 percent from that five-year average, 2010 is off -7.12 percent — hardly reason for calling an end to the recession, locally.
Three factors continue to hamstring local economic growth, however: high unemployment, a glut of real estate inventory and a lack of diversified industry in the area.
Unemployment in 2010 is on track to be the worst in a quarter century, tracking at 9.6 for the year (December unemployment figures for the county are due out next week), putting many area residents not just out of work and the ability to purchase locally, but, more tragically, out of their homes. That situation only adds to the large inventory of vacant and unsold homes on the market — effectively killing new construction in the area, as well as driving down property values. As reported last week in The SUN, there is currently a 37-month supply of single-family homes on the market (with the same level of supply of condos and townhomes) and land inventories estimated at 87 months.
The third factor directly affects the previous two, as it deals with jobs creation and putting families into houses.
A specialized economy faces a greater potential for failure due to its dependency on a relatively narrow set of factors that determine its success. Pagosa Country experienced this principle in the late 1970s, when the local economy was largely tied up with the timber industry. When available timber dried up, leading to the closing of the county’s largest lumber mill (also leading to the elimination of other ancillary jobs supporting the industry), local unemployment shot up to over 30 percent, leading to an exodus of jobs and population from the county. The county did not recover for nearly ten years, when development and construction began to take hold.
In the early 1990s, the local economic situation improved even more as the potential for tourism began to be realized. Up until the past few years, Archuleta County has largely remained a two-sector economy — not exactly a prescription for economic vitality.
Indeed, with a surfeit of unsold homes currently on the market, construction and development has all but ground to a complete stop in the county. Accounting for over 15 percent of the economy in 2007, sales tax revenues in 2010 indicate that construction has diminished to the extent that it now constitutes just over one percent of local sales tax revenues.
Unfortunately, local leaders have been largely unsuccessful in attracting alternate industries to the area. With few amenities available for young families, infrastructure crumbling at an alarming rate and a downtown core area presenting the appearance of a ghost town (the shopping center adjacent to U.S. 160 between Seventh and Eighth Streets being a painful reminder of recent economic failure), local leaders have little to leverage when pursuing potential new business owners.
The marked success in tourism over the past few years has, arguably, mitigated the effects of an economic slump that might have been a repeat of the late 1970s. The Town Tourism Committee reports that lodgers tax receipts (a reflection of the numbers of visitors to the area) are up almost 8.5 percent year-to-date as of November.
Those numbers could continue to increase as a result of a national economy that is showing signs of a slow turnaround.
Late last week, the Wall Street Journal published a report released by the economic committee of the American Bankers Association that revised a previous, more modest forecast for gross domestic product in the coming year, boosting expectations to 3.3 percent, up from June’s 3-percent prediction.
The same report stated that the ABA expects GDP to have risen by 2.8 percent by the end of this year, exceeding previous expectations.
The Journal said that the ABA report was in line with its own survey from last week that indicated increasing optimism from economists, with predictions of growth at better than 3.2 percent during each quarter of 2011.
Federal Reserve Chairman Ben Bernanke reflected that optimism late last week, when he predicted GDP to expand between 3 and 4 percent over the next year.
Given that optimism, the ABA’s committee predicted the creation of 2.1 million new jobs in the U.S. over the next year, a marked improvement over the 1.1 million jobs added to the economy in 2010 (marking 12 consecutive months of job growth in the private sector).
For his part, Bernanke tempered his optimism by adding that the expected growth would not be sufficient to make a significant dent in the nation’s unemployment.
While the country’s unemployed (above 9 percent for the twentieth straight month, the longest period of 9 percent plus unemployment since the Great Depression) may not benefit from the nation’s economic expansion, it will certainly please corporations (recording record profits last year), Wall Street investors and those U.S. citizens currently employed and feeling less restricted by hard times.
That positive news on the national economy could translate into good news for Pagosa Country, as those fortunate few turn to the area as a vacation destination, eager to spend their dollars with local merchants and restaurateurs, boosting lodgers tax and sales tax receipts alike.
However, as with the rest of the country, that good news does little to satisfy the local unemployed. Until positive sales tax numbers translate into substantial job growth in the area, many Archuleta County residents will continue to view reports of growth as nothing more than abstractions on a government spreadsheet.