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May sales tax revenue received in July 2013 totaled $504,611.42. This is an increase of $30,407.72 or 6.41 percent over May 2012.
Each month, Pagosa Springs Town Manager David Mitchem uses a county report to prepare a sales tax revenue analysis, which he presents to town council at its mid-month meeting.
Resolution 2012-19, a policy to enhance the financial stability of the town of Pagosa Springs, was passed by town council last December as part of the 2013 budget process. It was an extension of a system implemented in 2009 whereby town staff monitors the town’s sales tax revenue on a monthly basis, reporting fluctuations from the prior year’s and month’s revenues to the town council.
“In general, it is a means for us to be proactive,” town planner James Dickhoff explained at the time. “As we get the indication that we are seeing some reduced sales tax collections, we can react pretty quickly. We’ve instituted this policy over the last three years and it has worked very well for us.”
Sales tax revenue for May 2012 was $474,204 and for 2011 it was $541,750, which makes the average for the last two years $507,977. Consequently, this month’s figure of $504,611 is only slightly below the two-year average, down $3,366 or .66 percent. If it had been a 5-percent drop or more Mitchem would have been required to take emergency action to reduce the town’s spending.
Section 3.9 of the Town of Pagosa Springs Home Rule Charter describes the town council’s authority and responsibility to anticipate revenues and adopt a balanced annual budget. In addition, Resolution 2012-19 lays out guidelines for the town manager as to when and how to reduce town expenditures:
“Whenever the percentage of sales tax revenues collected falls more than 5 percent below the average revenues collected for the same period in the preceding two fiscal years and the percentage of sales tax revenues collected in the previous month (or previous two months) falls 5 percent below the average revenues collected for the same periods in the preceding two fiscal years, the Town manager shall implement a 7 percent reduction in sales tax related expenditures.”
Sales tax revenue for April 2012 was $426,995 and for 2011 it was $369,793, for a two-year average of $398,394, which means the April 2013 figure of $403,712 is an increase of $5,318, or 1.33 percent. Sales tax revenue for March 2012 was $485,810 and for 2011 it was $461,208, for a two-year average of $473,509, which means the March 2013 figure of $532,221 is an increase of $58,712 or 12.4 percent. In other words, there is still no reason for the town to consider an emergency reduction of expenditures.
If any of those calculations had shown a decrease of 5 percent or more, Resolution 2012-19 would have kicked in. “Implementation shall include apprising department heads of the shortfall 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 a 15 percent reduction in sales tax.
However, if the any of these situations occurs and then is followed by two months of growth or recovery, the town manager is authorized to return to the original 2013 budget as approved by town council.
“Previously, we were free-writing budgets that were reductions from a full budget of five, ten or fifteen percent,” Dickhoff continued, “and then we would automatically implement those. This might be a little bit of a different strategy. As we deal with it (any possible revenue reduction), we identify the important expenditures versus the non-important expenditures, and make those adjustments accordingly as we get that data in.”
So far this year, May has been the only month to see a decline in sales tax revenues when compared to the average for the previous two years. Sales tax revenue for January 2013 was $477,510, an increase of $51,093.5 or 12 percent over the previous two-year average, and for February it was $460,838, an increase of $58,621.5 or 14.6 percent.
Breaking the sales tax report for May down by sector, revenue generated by retail trade — the largest portion of Archuleta County’s economy — went from $211,686 in 2012 to $231,746 in 2013, an increase of $20,060 or 9.5 percent.
However, the second largest portion of Archuleta County’s economy —accommodations and food service— generated $86,829 worth of revenue in May, a decrease of $3,170 or 3.5 percent compared to 2012.
On the other hand, Jennie Green, from the Town Tourism Committee, reported the lodging tax revenues were $25,568 for the month of May, an increase of $1,285 or 5.3 percent over 2012. The lodging tax is collected by hotels, motels, and vacation rental properties, and is in addition to the normal sales tax charged by all other businesses.
Green expects lodging tax dollars to decline for the months of June and July because of the West Fork Complex fires and the cancelled fireworks on the Fourth of July. She points out while local establishments did have their occupancy rates affected by firefighters, those guests are tax-exempt.
Arts, entertainment and recreation — another sector of the local economy largely controlled by the flow of tourism — brought in $2,813 worth of sales tax revenue, an increase of $861 or 44 percent over last year.
Utilities companies contributed $45,331 in May, which is $7,657 or 20.3 percent more than last year, while the construction industry rose 59.1 percent to $13,372. Real estate and rental revenue, on the other hand, dropped slightly to $8,987.
The manufacturing sector garnered $31,825 in May, an increase of only $495 or 1.6 percent over 2012, while wholesale trade rose by 3.2 percent to $28,841 and the information industry produced $28,176, an increase of $2,550 or 10 percent.
Finance and insurance, professional, scientific and technical services and waste management all showed modest gains while educational services, other services, and health care and social assistance all dropped slightly.