Sales tax collections, the largest source of revenue for the city, are up just over 2% through May when compared to same period last year. Last year the city was seeing double-digit increases.
While Steamboat Springs has collected more sales taxes through May then it did last year over the same period, those collections are not seeing the steep, double digit, revenue increases of just two years ago.
City Finance Director Kim Weber told City Council on Tuesday that she is projecting the city’s sales tax to increase 2% over last year’s figures, which will likely require some cuts to current city services.
“We plan on starting the budget with 2% above the current year, which as you know is going to make for a difficult budget year because inflation is higher than 2%,” Weber told Council on Tuesday. “What it will probably mean is a reduction in services in some way, shape or form.”
Roughly two-thirds of the city’s revenue comes from sales taxes, which is the main reason Council Members Bryan Swintek and Steven Muntean approached their fellow council members with a plan to reduce general fund expenses by consolidating the city’s fire department with the larger fire district.
City Manager Gary Suiter said his concern when seeing this numbers was that it would be a “tight budget year” that will result in a cuts to services.
“Probably you’ll be seeing some proposed reductions in service as a part of the budget process, which really just reemphasizes councilor Swintek and Muntean’s presentation last week to diversify our revenue base,” Suiter said.
“This is paying the price for being so dependent upon a single source of revenue.”
“It’s the same message for the whole time I’ve been here,” Suiter added, who first joined the city in 2015 as interim city manager, before taking the job permanently in 2016.
From 2016 to 2019, Weber said the city saw a relatively stable 6% increase in sales tax revenues each year. In 2020 there was an increase over the prior year of just 2%, as the pandemic shuttered Steamboat Resort early for the season and kept some businesses and restaurants closed through parts of the year.
“Ever since then it has been a lot more difficult to predict,” Weber said. “It was down at 2% in 2020, then up to 21% in 2021, 15% [in 2022], and now 2023 was a 3% increase over 2022. We’re projecting about a 2% increase for 2024.”
Other ski towns are seeing similar trends. Vail saw sales tax collections increase 16% in the start of 2023, but they are actually down 2% through March of 2024. It is a similar story for Winter Park, which saw a 9% increase to start 2023 but was up just 3% to start 2024.
Weber said she feels the city’s sales tax revenues often trend with consumer confidence. This makes sense, she said, as the city’s three highest categories for sales tax collections are miscellaneous retail, lodging and amenities and restaurants.
“When your consumer confidence is higher, you are more likely to go out to eat,” Weber said. “Looking at where it has been for 2023 and 2024, it’s kind of up and down depending on what’s happening nationally and globally, but it is trending downwards in the last couple months.”
Weber said she will assume a 2% increase in sales taxes as staff works to plan next year’s budget. Staff is required to bring council a balanced budget for 2025 in October. They will likely present options for potential service cuts at that time.
Top Photo Caption: Steamboat Springs Finance Director Kim Weber explains the city's various revenue streams in a presentation to city council members using different kinds of candy earlier this year. (Dylan Anderson/The Yampa Valley Bugle)