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Colorado Springs trims $20 million as sales taxes tumble

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Posted at 12:58 AM, May 29, 2020
and last updated 2020-05-29 07:58:27-04

COLORADO SPRINGS — The City of Colorado Springs has already cut $20 million from this year's budget as leaders brace for drops in sales tax revenue. More than half of the money the City spends each year comes from sales and use taxes. The most recent report on that revenue from March shows a 14% drop compared to the same month in 2019.

"We have frozen vacant positions, we're not doing any hiring, we've decreased the departments' operating budgets by about 20% and then also tried to put a freeze on any projects that could be stopped at this time," explained Chief Financial Officer Charae McDaniel.

The statewide lock down order was put in place in the middle of March. McDaniel expects the April sales tax report to show even greater losses when it is published in June.

"We anticipate that April will be the worst month," she said.

The hardest-hit businesses appear to be those who cater to tourists like hotels, bars, and restaurants. Those business levy an extra sales tax on hotel guests and people who rent cars know as the Lodgers and Auto Rental Tax or LART. Those revenues fell in March by more than 62% compared when compared to the same month last year.

"Obviously with a number of large hotels being closed starting in May, and that will be closed through June, it's going to be a very significant impact to that lodging tax," McDaniel said.

The LART tax is primarily used by the Convention and Visitors Bureau to advertise and promote the city to tourists in other states. However, a portion is also used in supporting city services for public festivals and special events like Territory Days. McDaniel said the money that would have supported large public gatherings this spring can be saved for future events. The goal as it relates to LART is to continue promoting the city.

"We are trying to keep our tourism contracts in place so that they can be promoting the city, maybe in a different way, maybe more towards our outdoor recreation which we have an abundance of here," she said.

"If they contact us and say hey, I've been impacted by this, then we work with them to make it easier for them if they need to be late, or a partial filing or whatever, we work with them very closely on an individual basis."

Certain industries have benefited under the stay-at-home and safer-at-home orders. Sales tax revenue from medical marijuana businesses grew 22% compared to 2019. Department and discount stores and business services also saw higher tax collections this March compared to 2019. McDaniel said the city plans to keep budget cuts away from essential services like police and fire protection.

"We are watching very closely every single month, we're keeping our eye on all the indicators making sure that we're minimizing the impact to the citizens of any reductions that the city might have to take."

City Council can spend money it has saved in reserves to avoid cutting expenses. The city received around $37 million in federal stimulus funds through El Paso County from the CARES Act. City leaders are paying close attention to debates in Washington D.C. as Congress considers a fourth stimulus bill that would include more relief funding for city and state governments.