Littleton's March revenue decline avoids worst fears

April tax numbers likely to be worse; more cuts likely at city hall

David Gilbert
dgilbert@coloradocommunitymedia.com
Posted 5/20/20

Littleton’s tax revenue plunged in March, but not as much as expected, city officials said on May 12. City tax revenues decreased significantly in March after the state health department closed …

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Littleton's March revenue decline avoids worst fears

April tax numbers likely to be worse; more cuts likely at city hall

Posted

Littleton’s tax revenue plunged in March, but not as much as expected, city officials said on May 12.

City tax revenues decreased significantly in March after the state health department closed bars, restaurants and other businesses in response to the COVID-19 pandemic on March 16, according to data presented at a city council study session.

Sales tax revenue in March was down by more than $337,000, or 12.6%, from the same month last year. General use taxes, which apply to equipment or materials used by businesses, dropped by more than $131,000, or 61.4%, from a year earlier.

Littleton draws 78% of its general fund revenues from sales and use taxes. Tax reports are delayed by a month, meaning full data on the impact of the shutdown in April — which lasted through the entire month — won’t be available until early June.

Despite the plunge, the numbers were buoyed somewhat by slightly increased tax revenue in some sectors: grocery stores and home improvement stores, which were allowed to stay open during the shutdown, and online shopping, thanks to numerous online retailers that now collect local sales taxes.

The drop wasn’t as bad as city staff had anticipated, said city finance director Tiffany Hooten, but there’s a long way to go yet.

“It’s important we get retail up and running under the new guidelines,” Hooten said.

Aspen Grove shopping center saw its sales drop 50% in March, she said, likely reflecting the 50% of the month that most stores were closed.

Hooten prepared three scenarios for the city budget’s future: Scenario A, the most optimistic, envisions a year-to-year drop of $5 million, or 11% of city revenues. Scenario B, which Hooten called probably the most likely, would be a drop of $7.1 million, or 16%. Scenario C, which Hooten said was the worst-case scenario, would be a drop of $10.9 million this year, or 24% of expected revenues.

Because the city could spread out the pain of revenue shortfalls over a longer period, the city should be able to retain some of its fund reserves. Under the best-case scenario, the city will still have 12.5% in reserve at the end of five years, within the city’s preferred policy of holding 8% to 18% in reserve. Under the worst case scenario, the city would be far below 0% — a violation of state law, and well below the minimum 3% reserves required by the Taxpayer’s Bill of Rights, or TABOR.

“We would never allow the city to get to that point,” Hooten said. “We would make changes before we got there. It would be irresponsible to let the city get to that point.”

The city has already made $2.1 million worth of cuts to the 2020 budget, including furloughing 58 employees, canceling consulting contracts, eliminating planned salary increases, and instituting a freeze on vacant positions.

Though Hooten said the numbers at present don’t warrant more cuts, more are likely coming.

Arapahoe County is slated to receive more than $114 million in federal funds, said City Manager Mark Relph, and current plans call for Littleton to receive around $4 million from the county. Relph said those funds will be used to upgrade city buildings to provide more physical protection to staff and visitors in keeping with health department guidelines, such as installing plexiglass barriers in city hall. Other portions of the funds will likely go toward small business grants and a proposed rent relief program for residents.

“We have a long way to go before we’re through this,” Relph said.

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