Sales tax trends cause for cautious optimism
The recent upward trend Glenwood Springs sales tax receipts, though encouraging, still isn’t stable enough to take the numbers to the bank when it comes to budget planning, the city manager says.
“Sales taxes on whole have been going up for about the last three years,” Jeff Hecksel said. “But, unfortunately, they aren’t up with any sort of regularity from year to year to be very reliable.”
Hecksel said he is optimistic about the most recent city sales tax report, which showed a 12.3 percent increase in retail sales for September, and a nearly 6.5 percent increase in sales taxes through three quarters of the year.
For budgeting purposes, though, the rule of thumb for the past three years and continuing for 2015 has been to project a 2 percent increase in sales tax revenues, he said.
That projection just barely played out in 2013, while the 2012 was a little better and the years prior to that had been consistently down, Hecksel noted.
City Council last week formally approved a $58.2 million 2015 city budget, including a $13.5 million general fund that reflects about a $1.2 million increase in spending for basic city services compared with this year.
It also adds back some of what was cut in the way of personnel from the city budget after the Great Recession of 2008. Included in the 2015 budget will be a new police officer position, an assistant city engineer, an extra city planner, a computer and information systems technician, and additional legal support.
Sales taxes account for roughly half of the city’s general fund revenues, and a much larger portion of the street maintenance and city bus service funds, and the special acquisitions and improvements fund.
“Sales tax does have a huge impact on our ability to do things throughout the city,” Hecksel said.
But it’s important to put the recent sales tax gains in perspective. And that perspective goes back to 2008, which stands as the benchmark year for the city in terms of revenues, he said.
“When I look at those numbers, I always try to compare how far we are behind that 2008 number,” Hecksel said.
Even if the city continues to bring in 2 percent more per month in sales taxes for the remaining three months of this year, that’s still only about 87.8 percent of the 2008 total, he said.
All the while, the city has had to adjust for increased costs, ranging from increases in health insurance costs to the general cost of doing business as a city, Hecksel said.
“I do appreciate that inflation has been low during this period, but there has still been inflation,” he said. “We have adjusted, and we will continually adjust as we move forward.”
A major concern heading into the new year is the condition of the city’s electric utility fund, which was hit with an unexpected 6.5 percent increase in its wholesale power purchase agreement this fall. That was on top of a 12 percent wholesale increase last spring, and what’s expected to be another increase that would take effect next April.
In the meantime, the city will be looking to control costs within the electric fund to try to absorb some of the latest cost increase without adjusting customer rates, Hecksel said. The city will likely be looking at passing along another rate increase come April, however.
City Council approved the 2015 city budget with a 5-0 vote at its Nov. 6 meeting.
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