Soaring sales tax revenue continues to baffle budget managers

Routt County sales tax revenue hits 170% of what was projected for March, a windfall of another $500,000 in March alone.
John F. Russell / Steamboat Pilot and Today

Sales tax revenue continues to be above budget for the City of Steamboat Springs and Routt County, with revenue through March more than 30% higher than last year.

For the county, revenue collected in March was 170% of what was budgeted for that month, according to financial data. That means the county collected about $500,000 more in sales tax than expected in that month alone.

Looking at the full year, sales tax revenue is expected to exceed budget by more than 50%, bringing about an additional $4.1 million to the county.

“I’ve never seen numbers like this,” said Routt County Budget Director Dan Strnad. “Before the recession, we had seen double-digits, but let’s say less than 20%, less than 15%.”

Similar trends are also happening with Steamboat’s sales tax revenue, with the city reporting 34% more in March than a year ago. That translates to about $1.2 million in additional revenue in March alone.

“It’s hard to explain,” said Sue Davies, Steamboat’s budget and tax manager. “Categories may indicate a lot of it is in the mountain area and accommodation so probably just pent up demand to get out and travel.”

So far, year-to-date sales taxes for Steamboat top last year by nearly 35%, meaning the city brought in about $3.3 million more through March. than in the first three months of last year.

Accommodation and amenities saw the biggest jump of any category for municipal sales tax, rising about 64% from last year. Marijuana sales were the only category to decline, recording a 7% drop in tax revenue since last year.

Davies said the question she and city chief financial officer Kim Weber have been working on is how long that increased revenue will last. So far, the answer has been elusive.

“A tougher challenge for us will be as we enter the 2023 budget cycle trying to predict a good sales tax number to budget for,” Davies said.

There’s really no harm in budgeting less revenue than it actually does, because it just goes to reserves until the council appropriates it elsewhere, Davies said. The same is true for the county. Strnad said much of the additional revenue the county received last year was funneled into the county’s capital projects fund for the new health and social services building.

Strnad said the county’s budget projections are based on a 15% growth in revenue from what was collected in 2019 — with the 2020 and 2021 budget years considered somewhat unreliable due to the pandemic. That equates to 5% growth every year, which Strnad says is generally considered pretty good. Actual growth was closer to 30%, Strnad said.

“It’s a far cry from that 5% that we think could be a very good number,” Strnad said.

While it looks like this trend can’t last forever — pent-up demand from the pandemic is often seen as a source of that revenue, and it’s expected to abate — Strnad said it’s possible he could. there is a greater change in the local landscape.

“Maybe there was this paradigm shift there that we just know what happened,” Strnad said. “Maybe there are more people, more wealthy people and that’s how things are going to be for a while.”

There are other things like the war in Ukraine, near-single-digit inflation, and various variants of COVID-19 that could still have rapid impacts on how those funds come in as the year goes on, he said. Strnad.

“When do we know?” Strnad rhetorically asked if this new revenue was a trend or a mirage. “I do not know.”

Sallie R. Loera