Local sales tax revenues plunged in March 2009, falling 22.5 percent compared to March 2008. After the seventh consecutive month of year over year decreases, city officials are hoping more shoppers like Taylor Bruce of Broomfield, shown above at F.M. Light & Sons in November 2008, will help revive local commerce.

Photo by John F. Russell

Local sales tax revenues plunged in March 2009, falling 22.5 percent compared to March 2008. After the seventh consecutive month of year over year decreases, city officials are hoping more shoppers like Taylor Bruce of Broomfield, shown above at F.M. Light & Sons in November 2008, will help revive local commerce.

March sales tax plummets

Collections decline 22.5 percent from same month in 2008

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By the numbers

Sales tax collections have been decreasing for the past seven consecutive months in the city of Steamboat Springs.

Month: Sales tax decrease

March 2009: 22.5 percent

February 2009: 19.6 percent

January 2009: 13.5 percent

December 2008: 9.1 percent

November 2008: 8.8 percent

October 2008: 4.3 percent

September 2008: 3.8 percent

Source: City of Steamboat Springs

— Steamboat Springs' March sales tax report, expected to be released today, will show a 22.5 percent drop in collections for the month, city officials said Tuesday.

Year to date, city sales tax collections declined 18.5 percent in the first quarter compared with the first quarter of 2008. March was the city's seventh straight month of year-over-year sales tax decreases, and the gap is widening - the percentage decrease has increased each month.

If sales tax declines continue to accelerate, the city will be forced to consider additional budget cuts that could include layoffs, officials said. The city already has cut millions of dollars from its 2009 budget through moves including weekly furloughs for most city employees. Those cuts allowed for as much as a 19 percent decrease in sales tax this year.

"We are down at what we had projected on our revised budget," City Manager Jon Roberts said Tuesday. "We'll be looking now at the next month to see if the reductions flatten out. If the reductions continue to accelerate, we will have to look at additional cuts."

The March sales tax figures were disclosed during City Council President Pro-tem Cari Hermacinski's and President Loui Antonucci's weekly City Council agenda review meeting Tuesday, with city officials including Roberts and interim Finance Director Bob Litzau.

"The trend isn't looking good," Hermacinski said after the meeting.

Antonucci agreed that "it looks like the slowdown is accelerating," and noted that this most recent monthly drop is particularly painful because March is the city's biggest for sales tax collections. However, Antonucci also said collections for April and May might stabilize because they are less dependent on tourism spending.

"I think the local spending is probably more consistent," Antonucci said.

But February returns suggested locals are buying less, as well. That month, the base of Steamboat Ski Area and western Steamboat each saw sales tax decreases of 28.7 percent. Western Steamboat caters primarily to locals. A detailed March sales tax report - which will divide sales tax revenue into categories and areas - is expected to be released today.

March's sales tax decrease was the largest of the current economic downturn. Sales tax decreased 19.6 percent in February, 13.5 percent in January, 9.1 percent in December, 8.8 percent in November, 4.3 percent in October and 3.8 percent in September.

Roberts said the city already has reduced its expenditures to the minimum level necessary to sustain services and said additional cuts would require a reduction in service levels or the use of financial reserves. Asked whether a reduction in service levels would include layoffs, Roberts said, "I think at this point, we wouldn't rule out any options."

City Council is scheduled to receive an update on the 2009 budget at its meeting next week.

Comments

downtown 5 years, 7 months ago

The slide isn't going to stop. We may need to look at where we are putting the marketing dollars. The cost of doing business isn't slowing but the revenues are and I'm not sure how long we will see allot of these small businesses hold on.

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Scott Ford 5 years, 7 months ago

No argument that Sales Tax collections are down. If we consider that nationally consumer spending was down about 40% for the same period a decline of 22.5% although not great it is not as bad as it could have been. The headline for this article could have just as easily read - STEAMBOAT LIKELY DOING 2X BETTER THAN REST OF NATION.

Just as the good times do not last forever neither do the bad times. The challenge is to keep things in perspective. There are some excellent signs that consumer spending is recovering. Will it return to 2007 spending level any time soon? Doubtful. A return to consumer spending levels of 2004/05 are likely more realistic. (The 2006/07 Let the good times roll party is over. It was fun while it lasted!)

Some local retailers likely will not survive if their revenue projections were based on 2007 spending levels. This is sad. If the business does not work on 2004/05 consumer spending levels it is not going to work any time soon. Unless one has a lot of cash stashed away - the real challenge is knowing when to call it quits. Continuing to hold on - hoping against hope 2007 will return - will only steadily reduce the options that are available.

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housepoor 5 years, 7 months ago

Lets hope gas stays low and more front range tourist come to Steamboat this summer.

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ybul 5 years, 7 months ago

If consumer spending was down by 40% in March the most recent month that data is available, would there be excellent signs that consumer spending is recovering? From what I have read the 40% declines come from unscientific telephone interviews as opposed to real data.

A 40% decline in March and signs of consumer spending recovering seem to be at odds. A fundamental shift is taking place, can the area reposition itself to take advantage of the structural changes occurring in the economy, or will we hope that the hay days will return?

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JLM 5 years, 7 months ago

It is unlikely that a comparison of general national retail spending trends to SBS is a valid comparison.

SBS' spending patterns are particulary troubling because they are accelerating at an accelerating rate. The trend is bad and getting worse at an accelerating rate.

How would one describe a "freefall" economic pattern? A bad trend getting worse at an accelerating rate.

Even cursory reflection on the sources of local spending would suggest that SBS' spending is built on perhaps the weakest fundamental type of spending --- "highly discretionary spending which likely requires a substantal investment" in travel to get to the site of the retail transaction.

To make it worse, it also is spending of the type which has many lower cost alternatives (e.g. dining out at a pizza joint v a sushi). The body count of spenders may recover but without any driver to return to the previous level of spending. This "substitute" spending pattern accounts for why WalMart and McDonald's are seeing meaningful increases in revenue.

Tourism --- particulary expensive tourism --- is a lagging indicator of recovery. Said another way --- the most discretionary spending elements are the last ones to show signs of recovery.

I certainly hope that local government is doing contingency planning that anticipates a continuing and growing problem. We will be lucky to see a 50% total loss before this is all done.

Good news --- it will all eventually recover unless capitalism is simply snuffed out.

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Scott Wedel 5 years, 7 months ago

I cannot find independent verification of that claim of a national 40% decline in consumer purchases. Gas stations are reported as being down 34.6%, but that is credited largely due to the price of gas being much lower.

Here the census appears to be showing about 10% declines nationally for March and April. http://www.census.gov/marts/www/marts_current.html Though, it does appear that things are stable at this 10% lower level and so this might be the new normal.

So a local 20% decline is far worse than national average.

Could it be that I caught a Scott Ford data mistake? In fact, that Scott Ford made a comment exactly wrong in that SB is doing 2x worse than rest of nation when he just claimed that SB is doing 2x better.

This is not a personal attack of Scott Ford. I think he is probably about the most useful economic person in the region. I am just astonished that I, a lowly reader of his columns, caught him apparently making a mistake.

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Scott Ford 5 years, 7 months ago

Hi Scott - The day is early - I am sure I will make a lot of mistakes today.

I likely posted my comment yesterday in a bit of haste. I was having some computer challenges yesterday and wrote this in the office of JBD Tech. (They rescued me - again!) I grow weary of having Sales Tax being viewed as the primary measurement of the local economy. It is important but the local economy is so much more.
Consumer spending is a fickle number to get - I like using information from the Gallup, Inc. They started doing a consumer weekly spending habits in January of 2008 A link to the Gallup poll data http://www.gallup.com/poll/118159/Weekly-Economic-Wrap-Spending-Jobs-Defy-Mood.aspx

Another source is "Retail Sales" data is from the US Census. http://www.census.gov/mrts/www/mrts.html Like all data sources they are not perfect. There is always a risk of trying to torture the number beyond what they can tell us. Gallup information is on total spending including "retail" but also includes services such as "haircuts". The US Census data referenced above does not include services.

I think very few would argue that consumers simply stopped spending in the second quarter of 2008. Do the consumer spending averages in Steamboat Springs mirror the nation? Likely they are a bit higher because of relative affluence.

Another one of my pet peeves - is the emphasis to compare Steamboat Springs sales tax results to other ski resort communities. Although there are elements that make us very similar to Breckenridge and Winter Park Steamboat Springs is more like Gunnison and Durango.

Here is a questing to my fellow "blog posters"; how much has the Steamboat Springs/Routt County economy contracted from 2007 levels? What is the best measurement? Retail Sales? I doubt it. In 2007 personal income in Routt County was over $1.1 billon. What would be your guess for 2008 and 2009? Just curious and always willing to learn.

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Scott Wedel 5 years, 7 months ago

Scott, But the gallup numbers are not dollars spent, but what people are thinking about doing about spending.

And a 10% drop in consumer spending is a massive drop because much of the family budget includes stuff like food and utilities in which it is hard to significantly reduce spending. Which is why some luxury retailers that specialize in discretionary spending saw sales drops of 40% while Walmart saw 5% decline and even some areas of growth.

I think the tourism portion of the SB economy is largely one of those discretionary spending items. Note the 36% drop in lodging revenues. WOW.

And while there are the uber rich that have a place here that are unaffected there are also many that are now overextended that were using credit. And there were locals living upon on expectations of appreciating property values and high construction wages with plentiful overtime as needed to live the SB lifestyle.

Is sales tax the one great number of the status of the local economy? No, but it is an accurate number reflecting portions of the local economy. Building permits are also way down. Construction work is down so much that at least one big construction companies is now paying subs very slowly.

I also believe in looking at those that are bigger and have more resources to see what they must know. I think it is hugely important that Atire at Thunderhead is asking for 5 years to pull a building permit. Adjacent to a Intrawest ski resort is supposed to sell out in weeks upon announcing plans. And they want 5 years?!!?? They must be looking at some really bad data.

Look at the swaths of home for sale in Stagecoach and there are many recent buyers there that bought as much as they could that don't have the appreciation values to refinance or the income (lack of overtime if still have work) to afford their home.

Healthcare and mining are strong. 20 Mile is adding staff to deal with the big move to the new area.

I don't know enough to keep up with all of the numbers for each economic category and put in adjustments for each category and sum it up in a spreadsheet to calculate the probable overall decline in the local economy. I thought that is what Scott Ford did for us.

But I think a drop of about 20% in the local economy from 2007 levels is probably a reasonable guess for the reasons given above. Most important is that I think that this is not some easily regained dip, but it is the new baseline and we will see growth (or declines) from here in the small single digits.

It is my opinion that comparisons to other Colorado resort town are irrelevant. Resorts are all different and the differences are no less significant than the similarities. There is relevance to looking at national and international economies because that is our customer base for our tourism and real estate sectors.

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JLM 5 years, 7 months ago

No comparisons are perfectly equal as SBS is a unique city; however, having said that the trends are important. If the trend in SBS were totally different than other cities, then it would be quite remarkable. The trends are virtually identical.

SBS is a bit harder to get to than other Colorado ski resorts and may, in fact, suffer a bit more.

The trend is not favorable and it will be a long time turning around but it will definitely recover and recover big time.

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downtown 5 years, 7 months ago

Umm... It is interesting that downtown added thousand's of square feet of retail space with the new business. I'm with Scott and believe that downtown is 40% or more down. It will take along time to build downtown up again; with the current marketing of Steamboat. Not sure that we needed 4 large commercial buildings even in a good economy.

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Scott Wedel 5 years, 7 months ago

Downtown, Scott Fords 40% retail sales decline number was a mistaken national number.

Unlike Scott Ford's question of how the overall local economy declined which is not easy to answer, how much downtown retail declined is specifically defined in the local data. Looks to me that "town" (presumably downtown) declined about 20%.

That number is obviously worse for many businesses because if some are claiming they are basically flat then others must be down more than 20%. And with all of the additional commercial space then individual businesses are seeing bigger losses because they are more people sharing a 20% smaller pie.

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housepoor 5 years, 7 months ago

so we doubled our retail space downtown but how many new businesses actually moved in? I know JC was about all his new tenants in his comments to the press but in reality all that happened is he begged existing businesses to move into his new space. We have a 10-year supply of vacant commercial space downtown. As far as those high price condos I can only find one recent sale to a realtor, can't figure that one out??????

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ybul 5 years, 7 months ago

The problem is that as people cutback, the city is going to have to further cut its budget. This leads to more cuts in spending for locals.

The problem with guessing as to what income is, is that it is a guess.

One could state that income will be down 30+% as market loses were massive in 2008, and I would guess that those loses will more than offset any income gains. Those with the highest incomes are able to slowly adjust to new income levels. So sales tax revenue may slide more slowly than incomes.

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JLM 5 years, 7 months ago

"Projections" is what economists call "guesses". Just a different word for the same thing. So what?

The "trend is your friend" because it tells the future usually very accurately.

Guest what? The trend is DOWN and will continue to trend down for a long, long time. And, then, it will turn up.

High net worth individuals are the most fickle spenders. They can almost always do without whatever they were spending their money on in the short term and they can always go down market.

They can skip a trip to SBS entirely. They can substitute McDonald's for Riggio's. They can wear last year's outfits and they can ski last year's skis. Hell, some of them can even cook spaghetti and meatballs.

Right now, high net worth individuals are musing the impending tax code changes and getting outed for their illegal UBS accounts. Spending is driven by confidence and right now there is a huge shortage of confidence.

Think any bankers are coming to SBS any time soon? Hmmm, maybe not so much?

The economy will begin to rebound in late 2009 and SBS will begin to feel the positive trend in the fall of 2010. Seasonal and regional economies always begin to feel the improvement when the "next" season starts.

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ybul 5 years, 7 months ago

First, I must comment that I read the article in Thursdays paper and find it disheartening that the URA is not going to receive any funds for ??? month. That is just peachy given the council just voted to take on 11 million in debt to build a glorified sidewalk. I would hope that the city council wakes up and ponders the consequences of this situation on the current bonds and their floating interest rates. If the federal government is finding it difficult to market its trillions in new real debt, not IOUs to the social security system, then what does the future hold for debt issues?

Yep them projections, you put 10 economists in a room and ask what is going to happen and they will give you 20 answers.

Yep the trend is your friend and an even better friend is historic cycles. Go read up on Kondratieff (http://www.kwaves.com/kond_overview.htm), as patterns have existed for years.

No matter how hard we try to manipulate the "free market" to avoid the consequences of past decisions the market tends to reassert itself. We have had historic cheap capital for a long time. Those days are gone and the most likely scenario that will come is a recovery in need item prices (as other countries begin to repatriate money lent to the government for real goods) and a decline in want item prices (million dollar homes and condos).

So in all reality the tourism economy here may suffer, however, the ag, and mining sectors might thrive. The tourism economy may recover if other countries bring the world out of recession as the US will not lead the recovery, as the problem has been too much debt all along and the US has the most of it.

That said on tourism, we do not have yellowstone, mesa verde, the grand canyon, etc. so branding and marketing will be key. Mandarin should be offered either at the college, high school or both in order to bring about that marketing advantage.

But who knows in reality where we are going, far too many question marks and to place a date on it is like trying to catch a falling knife, more often than not you are going to get cut.

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Scott Wedel 5 years, 7 months ago

Ybul, You are not reading Scott Ford's column in the Local because if you were then you'd be as worried about liquor store sales as ag (they are about the same size economically).

Steamboat is a nice place to live in the mountains. It is nicer than those places along I70 that get overwhelmed by tourists on the weekends. And it keeps getting easier for certain people to chose where they work. But these people are less rich, younger and more likely to have younger kids, and thus much of what was built recently is not well suited for them. They are more interested in value.

I think much of what was built recently was for the active baby boomer, possibly retiring early, looking for a second home in a resort situation. That market was about amenities and luxuries.

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ybul 5 years, 7 months ago

Scott, I have not been reading Scott's article in the local recently, as I have been too busy with work. I do not think I was worried about ag though. It is one of the few areas we still produce a product the rest of the world needs - not wants. As such our trade imbalances will partially be balanced by ag exports, contributing to a rise in food prices nationally/locally and in turn give that sector a boost.

Maybe I did not state it very well, that ag and mining might be the bright spots in the towns future. Liquor is partially tied to the tourism bug and will probably lag unless the Chinese start vacationing. Tough without a national park more effort will need to be made to set the area apart from others, if the Chinese do start to travel.

Even though location neutral workers are easy to set up office anywhere, the broader economy will have an impact, especially now that people realize home values do not only go up and Steamboat Springs is relatively expensive today.

In my first attempt to "pin the tail on the economy" I stated that the economy could decline by 30+ percent. My thoughts failed to recall the lack of real estate sales, so maybe that number was light. Though the whole act of making a forecast today makes no sense without knowledge of what the federal reserve and federal government intend to do. Most times it has been the path of inflation as it is easiest. Though that could have serious consequences if it gets out of hand. As both policies are hidden taxes on holders of US assets and foreign owners are getting upset with this taxation.

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ybul 5 years, 7 months ago

So I read Scott's latest article, seems like he has a similar interest to me, in economic modeling.

However, to classify liquor as a leg of the economy is not sound. A leg of the economy would be one in which wealth is created or extracted by some process. Liquor, except in the case of the local brew pub is an example of leakage from the valley. In addition the brew pub if it were exporting beer could be considered a leg, though liquor while it does create a job, does not have the impact of bringing in new wealth, except through tourism so in Scott's upcoming article maybe he should point that out.

Ag-Mining-Forestry-Tourism-Retirees-Location Neutral workers, would all be legs, there might be more. BTW, the first three probably will do better than in the medium term past (in the US, with an eye on cost controls as the energy cost might kill all increases in revenue), while the other three aspects might not, though the location neutral thing may still do well as long as the cost of housing declines.

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Scott Wedel 5 years, 7 months ago

I don't think that liquor sales is supposed to be considered a leg of the economy. It is being used to show that ag is a small part of the local economy. That ag (or liquor sales) could go up 100% or down 50% without seriously affecting the local economy.

Wealth creation is more than making something. Getting the product from the manufacturer to the customer also creates wealth. Thus, a liquor store is considered to be creating wealth because they are putting out a product that people want at a price which they are willing to pay.

I think the important distinction of different parts of the economy are their multiplier effects. A manufacturing job also creates delivery and sales jobs. A wealthy retiree with health insurance helps create healthcare jobs and property maintenance jobs. A big box chain brings in local salaries and sales tax and maybe lower prices

And it is these secondary effects that local government should consider much more closely. Because the promenade at the base area probably won't help the local economy much, but what effect it has will result in more sales tax. But something like a free city wide wireless internet service (a totally made up example) might attract more high wage people and do much more for the local economy, but wouldn't obviously bring in more sales to the City.

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ybul 5 years, 7 months ago

While the ag sector going up or down 100% would have little effect I agree. The effect it would have could be similar to a city wide wireless service. In that food, done right could add to the flavor of the valley. Take the owner of the Epicurean he is a master butcher, if more beef was raised from birth to harvest and then processed for national marketing, it could add to the marketing component.

If you look at the ag sector, why would you not consider the groceries as part of that sector, restaurants, etc.. They are connected at the hip and though much of the grocery stores sales leak out of the community to buy the product to be sold.

While I agree on the small impact that agriculture is, I also see it as an area that has great improvement possibilities. The problem with agriculture in the valley is that it is primarily in meat animals, the lowest margin ag item available. Produce yields 10+X the income per acre as beef. What if you had a slight alteration to the model and produced a more balanced food supply saw an increase in revenue of 5 fold, saw the increase in jobs from distribution and sales jobs. Then what kind of impact would that have?

What if some of those products bore the name ski town meats and people in Chicago saw it and said hey, lets go to the area that makes this great food. What kind of impact would that have, you get the added benefit of having a product that can bring in money in the mud season as say moots cycles, smartwool, etc..

So just as liquor sales are partially the result of the tourism sector, ag sales also include grocery sales even though some of those sales are generated because of tourist activity. It is a bunch of blurred lines between the pillars of the economy. But to say that Ag and Liquor sales are similar fails to view Ag holistically and see that ag also is the distribution and sales of ag products, which I am sure will turn out much larger than liquors percentage. In historic terms it was about 30% of personal income, it probably dropped to 15% of income and probably is increasing. I do not know the exact figures, though I am sure of the 30% in the 50's and I know it is less today, and I would also guess the trend is upwards on percentage of income based upon imperical data I have seen.

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