Sales tax makes life as we know it possible

Denver south mayors share their perspective

by Jan Wondra

The next time you get ready to click “buy” on an online purchase, you might want to pause just a moment to consider what the sales tax that would have accompanied a local purchase actually does for your quality of life. As it turns out, sales tax is a major factor in how smoothly your everyday life really runs, from street repairs to street lights, libraries, garbage pickup (in some municipalities) to city events, parks and trails, to funding local police departments and sheriff’s salaries.

“Sales tax is the lifeblood of cities,” said Centennial Mayor Cathy Noon. “The Streets at SouthGlenn and Centennial Promenade are our largest shopping areas, and IKEA, Sears, the Walmart Neighborhood Market, are important. Every penny spent in your own city comes back to you. It has a direct impact on your community.”

Cities derive income from a variety of revenue streams, including property tax, sales tax, use tax, head tax, lodging taxes, park fees, building inspections and a variety of permits. Every municipality employs a different mix, but if a city has any level of retail shops, sales tax is a critical component of the annual budget.

“If we didn’t have a sales tax, we would be in a difficult position,” said Greenwood Village Mayor Ron Rakowsky. “Most of your city services are significantly

supported by sales tax—everything from snow plowing, parks, lighting to street improvements. There is no free lunch, you want something, you have to pay for it, you don’t want it (as a city), you don’t pay for it.”

Colorado is a relatively low-tax state compared to others back east, where many cities have a municipal income tax and property taxes often four to five times that of Colorado cities. Most Denver south communities have opted to keep property taxes low and applied the tax to office and retail operations. Even during the recession, sales tax held strong.

“We were very fortunate during the recession we didn’t have a large dip, our sales tax revenue held up,” said Littleton Mayor Bruce Beckman. “We have an environment that nurtures retail businesses. Retail on Santa Fe has done better than they expected and our downtown Littleton retail, our restaurants were up 4 percent through November.”

Some municipalities are bathing in strong retail sales and all have immediate uses for the revenue.

“Our sales tax is put right to work, funding not just infrastructure for our small, relatively new city, but a big part of the (sales tax) use is for police services, and we share dispatch services with Parker,” said Lone Tree Mayor Jim Gunning, whose city is home to the regional Park Meadows Mall. “People don’t think about what a city does, they just expect it to be done. In our city, we don’t have property taxes and sales tax even pays for garbage services.”

While cities count on sales tax revenue, they don’t necessarily spend it immediately.

“We keep reserves to cover the unexpected,” said Mayor Rakowsky. “If we’re doing our jobs, we always budget with a surplus.”

The national struggle for retail volume this past fiscal year, which resulted in closure announcements from major retailers, largely by-passed the Denver area.

“When Sears, Macy’s and Walmart all announced closings, we weren’t touched; locally those stores do well in our cities,” said Noon.  “It shows the importance of shopping local. If a chain is looking at cutbacks, they look at the profitability of each store, so shopping locally helps to keep them open.”

Most mayors expressed an ongoing concern about the impact of growing online shopping, referred to as leakage, for which, with few exceptions, no sales tax is collected.

“Taxing online sales is about marketplace fairness,” said Beckman. “The concept of taxing online sales is not an additional tax, it’s a compliance tax that should be delivered to our city and our state. Shopping online is not without a local impact.”

While municipalities would like their fair share of eCommerce tax revenue, if it were ever collected, how that would be done is subject to debate.

“If states get in the middle of collecting our sales tax, even a month delay would be serious,” said Beckman. “We’re one of the cities significantly impacted by online sales.”

Most Denver south mayors are quite positive about retail development within their cities. In Littleton, Aspen Grove continues to do well, as is the new Meadows at Platte Canyon. In 2017, the new Littleton Village will add another 250,000 square feet of mixed use. Greenwood Village is looking at continued development around its light rail stations, especially the Village Center projects. Lone Tree continues to add retail; this past year the city saw the addition of a new 100,000-square-foot Cabela’s store near the bluffs. Centennial, meanwhile, is looking to shift its dependence on retail strip areas like Arapahoe Road, which accounts for just more than 20 percent of the city’s nearly $34 million in sales revenue last year, toward retail experiences, such as its Streets at SouthGlenn.

“Retail creates a sense of place. The last thing you want is for a building to go vacant—a vibrant area attracts more retail and activity,” said Noon. “It’s cyclical—with vibrancy it’s where everyone wants to be—it makes the case of keeping local retail as a social amenity.”