In a year in which both business and government bottom lines were battered by COVID, Longmont was buoyed by big-box stores, internet shopping and marijuana.
Those categories helped push December city sales and use tax collections 10% higher than December 2019, according to an analysis presented this week to city council. Year-to-year, tax revenue is up 4.6%.
“This is obviously better than we were envisioning,” Jim Golden, the city’s chief financial officer, said of the collections compared to a budget that was adjusted downward in response to the coronavirus pandemic. “While some businesses were negatively impacted during COVID, others were kind of thriving.”
Hotels, restaurants and some retailers were among those who saw a negative impact, while grocery, liquor and big-box stores and marijuana dispensaries saw their sales thrive.
Net sales taxes collected from businesses in the apparel, automotive, food and home furnishings categories were all down for the year but lodging taxes saw the biggest decline at 59% this year versus last, according to the report.
That decline in lodging taxes is not a surprise, given the impact the pandemic had on travel and events, but it does have a direct budget impact, Golden said. The 2% lodging tax added to each hotel stay is collected by the city and funds a portion of the Visit Longmont budget. The organization in June released its executive director due to financial concerns associated with COVID-19.
Representatives of Visit Longmont did not respond to requests for comment on any further budget impacts.
Longmont hotels were 26.3% full in December, BizWest reported in January.
Categories with month-over-month increases in December included general and lumber, which Golden said was indicative of strong sales at big-box stores.
“Lumber, in a sales tax perspective, includes big boxes like Home Depot and Lowe’s and more places that thrive in this environment,” he said. “We saw the same thing happen in landscaping type places, anything yard-oriented. All did well and probably had record results.”
Home improvement projects were big business in 2020. Max Anderson, chief economist at Porch.com, an online marketplace connecting homeowners to contractors, in July told NPR, "In terms of like measured history in the United States, this is the highest levels of home improvement spending we've ever seen."
Similarly, a survey of 1,083 people 18 and older conducted by Statista in July, found 76% of respondents completed at least one home improvement project last year.
Internet sales also boomed last year.
“We had at least a 100% increase in internet sales activity in 2020,” Golden said. “You could pretty much imagine that was happening just by the number of Amazon trucks on the street.”
The local spike in online shopping mirrored a nationwide trend: CNN, citing a June estimate from research firm eMarketer, reported in October that “US e-commerce sales will increase 18% to $710 billion” in 2020.
Sales taxes from the four marijuana dispensaries licensed in the city also were on trend. Statewide, marijuana sales topped $2 billion last year, according to the Colorado Department of Revenue.
Locally, that spike in sales led to a nearly 75% increase in the city’s special marijuana sales tax collected in December and an 80% increase year over year, according to the analysis.
That special tax is one of three on marijuana sales in the city. Pot purchases also are subject to the 3.53% city sales tax and a statewide 15% retail marijuana sales tax. Revenue from the city’s 3% special marijuana tax in 2020 was earmarked for specific purposes: Half of it for the city’s Affordable Housing Fund, and the remainder to early childhood education and human service agencies.
Golden said city council in its next budget process probably will assess any excess funds and reallocate them.
The higher-than-expected tax revenues don’t mean the city didn’t see financial impacts from COVID though.
“While sales tax came in greater than budget we still had shortfalls that were pandemic-related,” Golden said pointing to declines in fees collected by Recreation Services, Senior Services and the Longmont Museum. The decline in Recreation Services revenue is more than $3 million, he said.
“So the fact that sales tax (revenue) exceeded our budget helps us offset the decline or shortfall of those services,” Golden said. “Once we close the books on 2020, we’ll see where we’re at.”
The books will be closed later this year. An audit typically takes place in late May or early June, Golden said.
The December and 2020 year-to-date revenue bodes well for the city budget this year and next.
“Sales tax budgeted for 2021 are less than 2020 actual. That’s good for the 2022 budget process and also might allow us to use money in 2021 that we had not projected or anticipated,” Golden said, adding when they are available, the final numbers will be reviewed by city council.
The 3.53% city sales tax is divvied up between the General, Capital Improvement, Streets, Open Space and Public Safety funds. Much like the budget itself, some projects were cutback in anticipation of revenues, Golden said.
Revenue exceeded projections is “going to allow us to reassess what’s available for those areas,” he said.
