A tale of Two Cities: Glenwood Springs sales tax revenues are down, but Rifle is weathering 2020 without budget deficits
Only 27 miles separate Glenwood Springs and Rifle, but their economies might as well be on opposite ends of the state.
While sales tax, the lifeblood of a municipality, is collected at a comparable percentage in both cities, Glenwood is reliant on out-of-town dollars whereas Rifle is buoyed largely by its residents, who often go elsewhere to shop.
Prior to 2020, both cities saw property tax revenues decline as the oil and gas extraction industry dried up, but sales tax collections continued to trend upward.
Then came the double whammy that was a global pandemic and the Grizzly Creek Fire.
On the west-end of Garfield County, the city of Rifle relies less on tourism than Glenwood Springs to fill its coffers and more on residents’ purchases, Rifle City Manager Scott Hahn said.
“We did get hit during the first few months of the pandemic,” Hahn said. “But, in the following months, it’s picked back up.”
At the lowest point, he said sales tax revenue was down about 7%, but the dip only lasted for a couple months.
“The federal stimulus came out, and I think that helped a lot,” Hahn explained. “Plus, we did our own program helping out businesses. We were able to keep the businesses that were threatened whole, which helps everyone.”
In Rifle, sales tax is 8.15%, but the city keeps 4.25%. The rest is divided between the state (2.9%) and Garfield County (1%).
Even after collecting a higher percentage, however, Rifle only receives about half the amount Glenwood does.
In 2019, Rifle collected $10.7 million in sales tax, up from $10.2 million in 2018. General retail accounts for the bulk of sales tax collected with food sales coming in at a distant second, followed by bars and restaurants.
The revenue is no less important for the city, though.
“Sales tax is critical and makes up most of our income,” Hahn said.
When the pandemic hit, many cities cut employees loose to reduce operating costs, but Hahn said Rifle bucked the trend.
“We made a point of not letting anybody go when this thing happened,” he said. “I felt that was important for a few reasons: It’s more expensive to rebuild a workforce than to keep them on, and employees are a significant portion of the economy.”
If Rifle’s employees remained at work, they might help keep the economy afloat by spending their wages in town, Hahn said.
As Glenwood experienced decreased revenues heading into the summer, Rifle’s revenues gradually rose.
“We expect a lot of our dollars to trickle down to Grand Junction or over to Glenwood,” Hahn said. “Rifle residents tend to live here, but spend their money elsewhere.”
The same travel restrictions that hindered Glenwood benefitted Rifle. People started shopping closer to home, and with abundant time on their hands, they took up new projects — and drinking.
“We saw spikes in our hardware sales, outdoor recreation, and our liquor sales went up,” Hahn said. “I think we retained a lot more sales tax than we typically do, which helped insulate us from the declines other municipalities experienced.”
Like Glenwood, Rifle anticipated about a 10% decrease in overall sales tax revenue for 2020, but the city has since adjusted its predictions.
“We’re budgeting flat for this year,” Hahn said. “And I’m not anticipating that to change in 2021.”
A tourist hub, Glenwood experienced steady growth after the Great Recession, but the city’s economy is heavily reliant on its accessibility.
“Our largest industry is obviously tourism,” Mayor Jonathan Godes said. “And, a lot of our annual budget is made up of sales tax.”
While Glenwood’s sales tax is set at 8.6%, the city only receives 3.7%. The rest is divvied up among the state (2.9%), Garfield County (1%) and the Roaring Fork Transit Authority (1%).
Once collected, Glenwood uses the sales tax to pay for street repair, inner-city public transit and operating costs such as employee salaries, the police and fire departments and IT.
“The only way we really pay for stuff is basically sales tax,” Godes said.
Like other cities, Glenwood collects some property tax — federal grants and enterprise funds for accounts such as utilities — but these revenue streams pale in comparison to sales tax.
“Sales tax pays for about 40% of our general fund,” said Steve Boyd, Glenwood’s chief operating officer.
Going into 2020, Glenwood anticipated its sales tax collections could increase about 3%.
“Since the bottom of the recession, we’ve seen steady and substantial increases,” Godes explained. “At the beginning of the year, we had no reason to doubt that would not still be the case.”
COVID-19 changed everything.
By the end of July, the city only collected about $9.5 million in sales tax revenue, about half the $19 million it collected throughout 2019, according to city documents. During both June and July — the city’s second and third largest collection months after December — collections were down significantly, with June dropping to a five-year low.
Glenwood responded by temporarily cutting employee salaries — the city’s largest operating cost — and didn’t issue cost-of-living bonuses or merit-based raises, Godes said.
With businesses shut down and travelers barred from leaving their homes or states, sales tax projections fell dramatically, with some forecasts anticipating more than a 10% drop from years past.
Panic and restrictions eased around June, and people started returning to Glenwood. Things were looking up. In July, the city’s sales tax revenue was only down about 5%, Boyd said.
The Grizzly Creek Fire ignited Aug. 10 taking with it the newly optimistic, or at least less pessimistic, sales tax projections for 2020 on the whole. Sales tax numbers are not yet available for August, but estimates are bleak, Godes said.
“We need to remind people that 80% of our tourists come from the east on Interstate 70,” he said. “So when that road is closed or even backed up, we are bleeding revenue.”
A recent study by the Glenwood Springs Chamber Resort Association indicated about 72% of the city’s sales tax revenue comes from people who live outside city limits, he added.
“In addition to tourism, we are the retail hub for the region,” Godes said. “If you need to go to a big box store, get your tire changed or buy a new wardrobe, there’s a good chance you’re going to do that in Glenwood.”
Current revenue forecasts put Glenwood’s end-of-year sales tax collections at about 14% less than in 2019, and Boyd said revenue in 2021 could be down an additional 10%.
But, without an answer for COVID-19, Godes said those predictions might also be overly optimistic.
“Colorado is one big outbreak away from that 10% down next year being 20% down,” the mayor said.
Glenwood’s economy is diversified to an extent, but limited availability of land for new development and high housing costs, which reduces the potential for a low-wage workforce, make additional diversification efforts challenging, Godes said.
For Glenwood’s economy to recover, it could require a shot in the arm.
“To fix our sales tax situation, give me a vaccine and make it widely available,” Godes said. “And, we need people to know we’re still here, and we’re open for business.”
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