Colorado Springs’ sales tax collections, which have ridden a roller coaster over the past few months, were on the upswing to start 2024, according to a report released this week by the city’s Finance Department.

Revenues from the city tax on TVs, appliances, cars and other consumer and business purchases totaled $17.2 million in February, a 6.6% increase over the same month a year ago, the report showed. February’s collections — which reflect spending that took place a month earlier — followed a 4.7% year-over-year drop in January and a 7.1% jump in December.

The city’s sales tax generates more than half of the revenue the city uses to finance its general fund budget, which includes spending on basic city services such as parks, roads and public safety. As a result, city officials closely monitor the performance of the tax. 

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The recent volatility in sales tax collections isn’t a surprise and likely reflects economic uncertainty among some consumers, said Tatiana Bailey, an economist and executive director of Data-Driven Economic Strategies, a Colorado Springs nonprofit.

In recent years, COVID-19 pandemic stimulus checks put money in consumers’ pockets, which they spent on online purchases, furniture and other items, Bailey said.

“Now what we’re finding, and we saw some of this at the end of ’23 as well, the consumer is slowing down,” she said of retail spending. 

Also, there are troubling trends when it comes to consumer debt, Bailey said. 

Interest rates on credit cards and auto loans are at record highs and delinquency rates are creeping up in those two categories — approaching 2006 levels, she said.

“That’s a bit worrisome,” Bailey said.

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Likewise, credit card companies report that card holder balances aren’t declining, which means consumers are only making minimum payments and failing to chip away at what they owe, she said.

As a result, consumer spending is now falling into two categories and contributing to the unevenness in city sales tax revenues, Bailey said.

Consumers who own a home with 3%, long-term mortgages, stable jobs and stock portfolios continue to spend, while those with high credit card and debt loads are holding back on purchases, she said.

“That’s why I think you’re seeing not that sort of consistent maybe 2% increase or 1% increase month over month (in city sales tax collections) when things were much more steady,” Bailey said. “We’re seeing a lot more volatility now.”

Several retail industry categories tracked by the city showed increases in sales tax collections in February, the Finance Department report shows. 

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Among those categories, business services — which includes professionals and consultants — saw a 49.3% year-over-year revenue increase in February. That’s a positive sign, Bailey said, because it means consumers and employers are relying on the expertise of those business professionals.  

Other retail categories with increases during February included auto repair and leases, which had a 19% gain.

That’s a possible indicator that consumers who can’t afford cars because of high interest rates are holding onto vehicles longer and paying to have them fixed, Bailey said. Conversely, revenues from auto dealers fell 2.6% in February. 

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The Finance Department report also shows February sales tax revenue gains in grocery stores, 14.4%; clothing stores, 14.3%; furniture, appliances and electronics; 11.3%; department and discount stores, 9.7%; restaurants, 9%; miscellaneous retail (including online purchases), 7.1%; building materials, 3.3% and medical marijuana, 3.1%.

In addition to the revenue loss in the auto dealers category, other retail industries with declines were utilities, 25.8% and hotel/motels, 2.1%.