STEAMBOAT SPRINGS — With millions of dollars in city sales tax revenue estimated to be lost this year, the city of Steamboat Springs is being forced to make deep cuts.

For the last five years, March has represented about 11% of annual city sales tax collection — the biggest month for sales tax revenue. This year, sales tax collection was down almost 30%, or nearly $1 million, in March — a concerning precursor to the economic impacts of the COVID-19 pandemic.

March saw the first sweeping public health orders handed down by the state in response to COVID-19. Steamboat Resort was forced to close early, severing a major source of sales tax for the city. While businesses deemed essential like grocery and liquor stores were allowed to stay open, most of Steamboat’s retail arm was closed.

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“The city relies and runs on sales tax,” said Kim Weber, the city’s finance director.

A 4% sales tax is imposed by the city, the collections from which make up about 60% of its general fund, according to Weber. Tourism contributes to 40% of the sales tax collected while the other 60% is generated from spending by locals.

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Steamboat Springs City Manager Gary Suiter acknowledged the city’s unusual funding structure.

“What’s unique is our overdependence on sales tax,” Suiter said.

Property tax is traditionally the driving revenue source for a city’s general fund. But it wasn’t until this year that the city instituted its first property tax in 40 years — a 2-mill tax approved by voters last fall. That new tax is solely earmarked for fire and EMS and is not directed into the city’s general fund as sales tax is. Instead, the city relies on the sales tax to help fund operations.

The mission is “packing in people” to spur sales tax collection, Suiter explained. Something like a slow snow year could drastically impact the sales tax for a tourism-driven economy like that of Steamboat. Instead, it’s now been affected by a pandemic.

The city maintains healthy reserves that will be used to help mitigate the losses, but budget cuts, furloughs and suspension of some services were still unavoidable.

“We’re tapping into those rainy day funds,” Suiter said. “And it’s rainy.”

While March meant a significant loss to the city’s coffers, the months of April and May are historically the lowest months of the year for sales tax collection. Weber estimates by the end of the month, the city will have lost about $2 million in sales tax revenue.

The summer months, a big time for sales tax collection, will further the city’s loss as nearly every major event has already been canceled, and tourism during COVID-19 is questionable.

“Bleeding is going to continue for a while,” Suiter said.

Based on projections, Weber said the city could lose a total of about $6.5 million in sales tax for 2020. Combined with other losses, the city could be facing a 20% decrease in revenue for the year.

Sales tax collection year-to-date is 4.4% less than the same period last year.

In comparison to 2019, all retail categories were down in March except for grocery stores and other food sellers, which actually saw an increase of 4.1%. Sales tax from utilities rose a modest 2.51%.

Restaurants contributed just over $300,000 to March’s collections, which represented a 46% decline over March last year. Lodging and amenities saw a similar decline, with a 47% decrease in sales tax collections. The largest single decrease came in the sporting goods sector, which saw collections cut by more than half.

In 2019, the city took in a total of $25,945,746 in sales tax revenue.

To reach Bryce Martin, call 970-871-4206 or email bmartin@SteamboatPilot.com.