Data Sense: Sales tax collections poised for continued growth

Brandon Owens

It’s amazing how much information we can extract from small bits of data. Take the sales tax collection data recently released by the city of Steamboat Springs, for example.

Although we only have three months of sales tax data for 2013, data for the first quarter gives us a pretty good idea of how collections are likely to shape up for the rest of the year because of the predictable monthly pattern in sales tax collections. The data indicates that total 2013 sales tax collections are likely to increase well above 2012 levels.

Because the city budgeted for sales tax decreases this year, the general fund will have more sales tax revenue by year end than expected if 2013 tax collections in fact are higher than 2012. This also means that retail sales in Steamboat this year will be higher than expected. It will be interesting to see when sales tax levels return to the towering heights experienced during the 2008 peak, when collections reached \$19.9 million.

The preliminary March 2013 tax report was released by the city May 1. According to the report, sales tax

collections in March were

\$2.19 million. This value likely will increase when all of the collections are in, but it already represents a \$65,529 increase compared with collections in March 2012. March’s collection raises the year-to-date total to \$6.02 million, up \$366,240 or 6.5 percent from the first quarter of 2012. Will this growth rate hold up for the remainder of the year?

Because we know the historical pattern of monthly sales tax collections in Steamboat, we can make a pretty good guess. It turns out that since 2000, first-quarter sales tax collections in Steamboat have accounted for an average of

about 34 percent of annual collections. Using this information, we can divide 2013 first-quarter sales tax collections by

34 percent to produce a reasonable 2013 forecast. When we do this, we arrive at a 2013 annual sales tax collections forecast of \$17.87 million. This figure represents a 1.5 percent increase from 2012 sale tax collections and indicates that year-end sales tax collections are likely to be \$1.23 million greater than expected in the 2013 budget.

It wouldn’t be surprising to see an even higher number by year end for a couple of reasons:

■ First, the final March sales tax number is likely to be slightly higher than the preliminary number, making the 2013 first-quarter numbers even rosier.

■ Second, the share of sales tax collected during the summer season has been on the rise in recent years as the Steamboat economy continues to diversify, becoming less dependent on peak winter months.

Of course, we know that these predictions will not be entirely accurate because no one knows exactly what the rest of 2013 has in store. However, they do represent a best estimate given the information that is available to us today. And when it comes to 2013 sales tax collections and retail sales, the best available information paints a positive picture for the remainder of the year.

Brandon Owens is an independent contractor for Yampa Valley Data Partners.