Steamboat sales tax revenue will likely keep slowing through 2023, but isn’t a concern
Kim Weber, the finance director for the City of Steamboat Springs, is known for making conservative financial estimates, so when she told city council she and her staff anticipate about a 4% drop in sales tax revenue in 2023, no one sounded the alarm.
Weber appeared before Steamboat Springs City Council during their meeting on Tuesday, July 19, and provided a sales tax forecast for 2023 that was both optimistic and concerning.
While the year-to-date 2022 sales tax numbers are strong compared to previous years, year-to-date gains have shrunk each month since February.
Sales tax revenue in 2021 ended 20% higher than 2020. While the pandemic ended Steamboat Ski Resort’s season early, 2020 was a resilient year for the city, as revenue bounced back during the end of the year and the city’s sales tax collections finished about even with 2019.
Weber told the council members she expects sales tax revenue to continue slowing down through the rest of 2022 and expects the city to finish the year with around 8% more sales tax revenue than last year— compared to a 27% year-to-date advantage posted at the end of May.
Sales tax revenue in 2022 has so far seen high collections in the lodging and retail categories. The U.S. Supreme Court’s ruling in 2018 that allowed states to collect sales tax for online sales, even if the seller is located in another state, has helped expand the pool of retail sales tax revenue, according to Weber.
She and her staff project 2022 to end with about $35.8 million of revenue, excluding an estimated $2.3 million expected to go into the Steamboat Springs Redevelopment Authority fund, which funds projects that improve the mountain area.
The finance director’s projection for 2023 anticipates about $34.4 million in sales tax revenue after omitting about $1.8 million promised for the SSRA fund.
Council member Heather Sloop asked Weber about a worst-case scenario.
“The big ‘R’ word is coming around the pike again,” Sloop said, referring to rumors of another recession. “Do you have any kind of gut feeling on that?”
Weber explained that Steamboat’s sales tax revenue typically follows the consumer confidence index even in scenarios when people’s income doesn’t change drastically. But she assured the room saying even if consumers do start having second thoughts about traveling, she doesn’t believe Steamboat would be devastated.
“I think if we see December indications of things going south quicker than we expected, we’re really good at cutting,” Weber affirmed City Council. “We’re not good at adding back. It just takes more time, it takes more planning, it takes more readings from City Council to approve.”
Council member Gail Garey asked Weber about the effects on sales tax revenue from the housing market crash in 2007, the most recent national recession.
Weber replied saying that the 2007-08 recession didn’t affect Steamboat’s sales tax numbers until 2009, saying that Steamboat’s economic downturn came later than a lot of other areas because so many vacations were booked far in advance.
While lodging and restaurant revenue went down by 15-20% during that recession, according to Weber, a relatively diverse economy compared to other ski resort communities buoyed the local economy.
“Because of our groceries, our utilities or other categories, it kept us closer to the 6-8% (overall) decrease instead of seeing that the huge dip,” said Weber.
Weber will provide her mid-year financial update during the City Council meeting on Aug. 23, when she’ll have sales tax numbers through June.
To reach Spencer Powell, call 970-871-4229 or email him at spowell@SteamboatPilot.com
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