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While two separate factions of the local population continue to debate the pros and cons of ballot issue A and its proposed community recreation center sales tax, the actual revenue collected by the town continues to fluctuate.
Whereas the sales tax revenue for December was down $30,534.88 or 4.66 percent compared to December 2012, the collections for January were back up again.
According to last week’s report from LeeAnn Foutz from the Archuleta County finance department, the January 2014 sales tax revenue totaled $495,989.99, which was an increase of $18,479.86 or 3.87 percent when compared to 2013.
As it stands now, the total amount of sales tax for the month is split 50-50 between the county and the Town of Pagosa Springs. That may change in April if town voters decide to approve a 1 percent increase in sales tax that would be solely devoted to the rec center proposal.
Since the December revenue was down, if the town’s share of taxes for January had also shown a 5-percent drop or more, town manager David Mitchem would have been required to take emergency action to reduce the town’s spending per town policy.
“This is one of the things that has kept us financially stable through some very difficult financial times over the past five or six years,” council member Don Volger said. “It would be foolish and unwise to change that policy. Things are looking brighter right now but maintaining this policy is still fiscally responsible.”
According to the resolution, the town manager must:
1. Budget sales tax revenue for 2014 at a level 2 percent higher plus $50,000 than the 2013 actual sales tax revenue, estimated to be $3,259,012, and split this amount evenly between the general fund and the capital fund.
2. Assign up to 3.25 percent of the general fund revenues to service organizations.
3. Postpone capital equipment purchases until the last half of 2014, unless approved by town council.
4. Monitor the town’s revenue on a monthly basis and report to the town council any fluctuations from the prior year’s revenues.
5. Deploy a financial stability plan, reducing town expenditures within two weeks of the advent of lower tax revenue over two consecutive months (or two out of the last three months) as compared to the average sales tax revenues from 2012 and 2013.
“The economy seems to be in an upward trend,” Mitchem assured the council. “The resolution lays out a methodology to reduce expenditures should sales tax revenues begin to decline. Actually, with a one-week notice, staff has the capacity to shift and to begin to reduce expenditures.
“Where practical, and unless council approves, we push capital expenditures off to the later part of the year. If there is a need to execute capital expenditures in the first part of the year, we will come to you and get approval for it.”
The resolution specifies how the town manager must frame his sales tax analysis in order to smooth out the impact of significant swings in sales tax collections.
“The question that comes to mind for me,” council member David Schanzenbaker said, “is maybe two consecutive months is too small of a window to look at for changes, because we do have fluctuations from month to month. For example, last month we had a twenty-four-percent increase over the previous year, so we are practically guaranteed to have a decrease next year for that time period.”
The town manger must prepare a sales tax revenue analysis each month based on the figures published by Archuleta County, which he then presents to town council at its mid-month meeting.
According to Foutz’ report, sales tax revenue for January 2013 was $477,510 and for 2012 it was $440,121, which makes the average $458,816 for the same period over the last two years. Consequently, this month’s figure of $495,990 is above the two-year average, up $37,174 or 8.1 percent.
On the other hand, sales tax revenue for December 2012 was $655,334 and for 2011 it was $687,969, which makes the average $672,652 for the same period over the last two years. Consequently, December 2013’s figure of $624,800 is also below the two-year average, down $47,852 or 7.1 percent.
Since those calculations indicated a decrease of more than 5 percent in December, but an increase in January, the town will have to wait until next month to see what happened in February before Mitchem can figure out if he needs to implement the financial stability policy.
“Implementation shall include apprising department heads of the shortfall,” the resolution states, “and working with department heads to conduct a review of all budgeted programs and services and categorize each into the following levels of service: 1) Essential Services; 2) Highly Desirable Services; and 3) Non-Essential services. The town manager shall initiate budget cuts or expenditure freezes eliminating Non-Essential Services based on their priority ranking. The town manager shall review departmental staffing patterns with primary focus directed toward reducing or eliminating part-time and temporary employment expenses. The town manager will determine which position will be filled on a case by case basis.”
The resolution goes on to describe even more drastic measures to be implemented in the case of a 10 percent reduction in revenue, and finishes up with what will happen if there is ever a 15 percent reduction in sales tax.
Last year, May and June were the only other months to see a decline in sales tax revenues when compared to the average for the previous two years. Year-to-date revenue is still up when compared to this time last year.
Breaking the sales tax report for January down by sector, revenue generated by retail trade — the largest portion of Archuleta County’s economy — went from $240,874 in 2013 to $233,710 in 2014, a decrease of $7,164 or 3 percent.
However, the second-largest portion of Archuleta County’s economy — accommodations and food service — generated $77,416 worth of revenue in January, an increase of $8,601 or 12.5 percent compared to 2013.
Arts, entertainment and recreation — another sector of the local economy largely controlled by the flow of tourism — only brought in $2,577 worth of sales tax revenue this year, a decrease of 45.5 percent compared to $4,729 last year.
Utilities companies contributed $71,072 in January, which is $3,829 or 5.7 percent more than last year, while real estate and rental revenue fell from $17,256 last year to $16,482 this year, a decline of $774 or 4.5 percent. The construction industry saw a huge gain, up $9,769 or 237 percent to $13,890.
Wholesale trade rose by 29 percent to $18,799 in January and the manufacturing sector garnered $17,822, a slight increase over 2013, while the mining industry went from $1,202 to $1,816 over the year.
The information industry, transportation and warehousing, and educational services each rose slightly. All remaining industry sectors showed slight declines over the year.