City sales tax forecast to continue on the up in 2019, 2020
Sales tax forecast to increase 6% in 2019 over 2018's sales tax revenue
STEAMBOAT SPRINGS — The city’s main source of funding, sales tax revenue, has been on the up for six years now.
At Tuesday’s Steamboat Springs City Council meeting, city staff presented projections of sales tax revenue this year and next year, which will be used to inform budget decisions as the city determines what money will be spent where.
City Finance Director Kim Weber said sales tax makes up 70% of the revenue the city uses to provide services. While there are property taxes levied on properties in city limits, none of the revenue from those property taxes lands in city bank accounts.
“(Sales tax) is our primary revenue source, and we aren’t very diversified in that revenue, so we really have to watch what the projection is — what we see out into the future — in order to budget for the next year and make sure we come in with a balanced budget,” Weber said. “We rely so heavily on sales tax, it’s really important to understand where it’s headed in the future.”
Weber said that based on national and local statistics, such as gross domestic product, unemployment rates and consumer confidence indexes, the city is projected to see a 4% increase in sales tax revenue in 2020, raising $28,675, 468 in revenue. Weber said city sales tax tends to follow trends in consumer confidence indexes most closely, particularly of high-income families, as high-income winter visitors drive a large part of city sales tax.
On Tuesday, City Council decided to budget based on the assumption of a 4% projected growth in sales tax. Weber explained this is a conservative projection.
“With our revenue structure the way it’s set up, sales tax is incredibly important, and we want to take a conservative approach to budgeting it, yet be as accurate as possible, so we can plan our services appropriately for the next year,” she said. “Though it is fairly predictable, we want to make sure we’re paying attention to all of the indicators that are available to us and take a lot of time in predicting the sales tax rate for our budget.”
This year is forecast to see a 6% overall increase from 2018’s revenue, from $25,998,035 in 2018 to $27,572,565 in 2019. As the year progresses and more data comes in about 2019 sales tax, this data will also be incorporated into the city’s budget planning.
Weber said in the meeting that since 2014, the city has seen a steady rise of about 4% to 6%.
By area, regional sales tax collection from businesses outside of the community, such as Amazon or AirBnB, has increased the most, with an 18.34% increase so far in 2019 compared to the same months in 2018. Within Steamboat, the mountain area saw an 11.6% increase, West Steamboat saw a 6.79% increase and downtown saw a 2.3% increase.
Most of the city’s sales tax revenue, 46%, comes in the winter months, from December to March, followed by 32% from June to September and 22% in the spring and fall shoulder seasons. All of these timeframes have seen an increase of 25% to 28% over the last five years.
Weber said while summer is getting busier in Steamboat, both summer and winter sales tax are growing.
“When we talk about ‘Summer is getting busier’ — it is, but winter is getting busier too, and in a dollar frame, a sales tax dollar frame, they’re increasing at about the same rate,” she said.
Consistently, miscellaneous retail, lodging and restaurants are Steamboat’s largest sales tax sectors. Weber said this is common when the economy is healthy, but these categories take a hit when the economy enters a recession.
“When we hit a recession, we see the restaurants and lodging drop significantly, and everything else stays fairly consistent because people still have to pay their utility bills. People are still shopping at the grocery store,” she said. “Lodging and restaurants are the two categories that fluctuate the most, but they’re a large part of our sales tax base.”
All of these categories have shown growth over the past five years, according to Weber’s council presentation.
To view the City Council’s discussion on this topic, visit steamboatsprings.net/agendas.
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