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Greg Schulte, who has taken over as interim town manager for Pagosa Springs following the recent resignation of David Mitchem, will give his first sales tax briefing to town council today, and, as it turns out, he will have good numbers to report.
April Sales Tax revenue received last week totaled $434,189.34, an increase of $30,477.82 or 7.55 percent compared to April 2013, according to a report by LeeAnn Martin from the Archuleta County finance department.
All sales tax generated within the county, regardless of whether it comes from a business within town limits or not, is split evenly between the town and county, and although the town will soon be receiving its half of sales tax revenue directly from the state (see related article in this issue), the monthly reports will still go to the county, which will disseminate the information to the town.
If the town’s share of taxes for April had shown a 5-percent drop or more, the town manager would have been required to take emergency action to reduce the town’s spending.
The Pagosa Springs town council votes every January to adopt a resolution to extend the policy to protect and enhance its financial stability.
“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,” mayor Don Volger, who was then a regular council member, said at the first meeting of the year. “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:
• 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.
• Assign up to 3.25 percent of the general fund revenues to service organizations.
• Postpone capital equipment purchases until the last half of 2014, unless approved by town council.
• Monitor the town’s revenue on a monthly basis and report to the town council any fluctuations from the prior year’s revenues.
• 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 the last three months) as compared to the average sales tax revenues from 2012 and 2013.
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, stating, “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.”
The town manager 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 Martin’s report, sales tax revenue for April 2013 was $403,711 and for 2012 it was $426,994, which makes the average $415,353 for the same period over the last two years. Consequently, this month’s figure of $434,189 is above the two-year average, up $18,837 or 4.5 percent.
Similarly, sales tax collections for March 2013 were $532,221 and for 2012 they were $485,810, for a two-year average of $509,016, which means last month’s revenues totaling $586,754 were $77,739 or 15.3 percent higher.
However, sales tax revenue for February 2013 was $460,838 and for 2012 it was $403,271, for a two-year average of $432,055, which means the February 2014 figure of $428,721 is a decrease of $3,334 or .8 percent. In other words, there is still no reason for the town to consider an emergency reduction of expenditures at this time.
If any of those calculations had shown a 5-percent decline, the resolution states, “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 ever a 15-percent reduction in sales tax.
So far this year, February was the only month to see a decline in sales tax revenues when compared to the average for the previous two years, and year-to-date revenue is up by 3.8 percent when compared to this time last year.
Breaking the sales tax report for April down by sector, revenue generated by retail trade — the largest portion of Archuleta County’s economy — went from $184,277 in 2013 to $205,326 in 2014, an increase of $21,049 or 11.4 percent.
The second largest portion of Archuleta County’s economy — accommodations and food service — generated $72,861 worth of revenue, an increase of $8,685 or 13.5 percent.
Town Tourism Committee director Jennie Green will report to town council today that lodgers’ tax revenue for April, which is collected above and beyond the regular sales tax, totaled $23,812, which is $6,205 or 35.2 percent higher than 2013. The last five months in a row have all set record highs for lodgers’ tax collection.
Arts, entertainment and recreation — another sector of the local economy largely controlled by the flow of tourism — brought in $1,219 worth of sales tax revenue, a slight increase compared to $1,024 last year.
Utilities companies contributed $53,118, which is only $943 or 1.7 percent less than last year, while real estate and rental revenue fell from $7,866 last year to $1,408 this year, a decline of $6,458 or 82.1 percent. The construction industry, however, rose to $10,228, an increase of $2,391 or 30.5 percent.
Wholesale trade rose by 5.8 percent to $21,255 and the mining industry garnered $4,167, an increase of $2,409 or 137 percent, while manufacturing went from $20,754 to $18,312 over the year.
The information industry brought in $27,437, an increase of $2,660 or 10.7 percent. Waste management collected $4,034, an increase of 2,350 or 140 percent. Scientific and technical services and health care also rose, while educational services and finance and insurance showed slight declines over the year.