Consumer spending falls in March/ War, weather send Springs sales-

0 Comments | Gazette, The (Colorado Springs), May 7, 2003 | by WAYNE HEILMAN

The start of war in Iraq and a winter storm combined to cut consumer spending in Colorado Springs during March, the fourth decline in the past five months.

Tax payments the city collected in April from March sales fell 4.4 percent from a year ago to $8.13 million, city officials said Tuesday. Taxes collected on sales in the first three months of the year are down 1.4 percent from a year earlier to $21.5 million.

It doesn't end there. City Budget Director Mike Anderson estimates sales- and use-tax collections will fall by 5.3 percent for 2003, or nearly $10 million less than budgeted. The city has deferred $11.2 million in capital improvements and purchases, but that cushion is shrinking.

City government depends on sales-tax revenue to pay for much of its daily operations, including police, firefighting, parks and road repairs.

"It's certainly not good news but not a big surprise," said David Bamberger of Bamberger & Associates, a local consulting and economic research firm. "While I suspect there was some influence from the war, we also are seeing a continuation of a slow-go local economy."

After making adjustments for seasonal fluctuations, city sales- tax collections have been dropping steadily since last fall, according to calculations by Fred Crowley, an economist with the Southern Colorado Economic Forum at the University of Colorado at Colorado Springs.

"Part of the decline is due to the uncertainty that led up to the war, but the other part is a general lack of confidence in the local economy," Crowley said. "While the war is now over, we have lost the spending from the deployed Fort Carson troops."

Crowley, city officials and other economists have estimated up to 2,000 jobs could be lost at local businesses because of 11,000 of the post's troops leaving for duty in the Persian Gulf region. That's on top of nearly 9,000 layoffs by local employers since January 2001.

Although recent employment numbers have improved, Crowley thinks other indicators of how the economy is faring won't reflect a turnaround until later this year.

"Typically newly re-employed people will save as much as they can to pay down debt and build up their reserves before starting to spend again," Crowley said. "It will be a while, several more months at least, before the local economy begins recovering."

Sales tax collections also have been hurt in recent months by a slowing in housing and commercial construction: Sales of building materials generate about 10 percent of the city's sales-tax collections, and housing construction is down 10.6 percent this year.

Sales in most major categories of retailers declined in March, though the lodging industry and department and discount stores reported gains.

CITY SALES TAX COLLECTIONS

Percent change from a year earlier. Monthly totals reflect previous month's sales.

SOURCE: Colorado Springs Financie Department