Food tax loss projected to top $13M
Calling it a number he is “extremely confident” about, Loveland Chief Financial Officer Brian Waldes told the City Council on Saturday that loss of sales tax on food will cost the city $1.1 million in general fund revenues each month, or a projected $13.2 million in 2024.
That means the council now faces some “stark” choices about whether it can remain a full-service city or whether some programs and services will have to go, he said.
“There’s not an easy way out of this,” Waldes said. “It’s going to be a sea change in either how citizens view their government or to services. Something’s going to have to give when the number is that big.”
Loveland voters approved the elimination of the city’s 3% sales tax on food for home consumption last November by a margin of two to one. Proponents of the measure argued that it would bring much-needed relief to local families, saving them $400 to $500 per year.
Waldes’ latest estimate is based on January sales tax filings by grocery stores, which started arriving last week and represent around 40% of all food sales in Loveland.
Department stores, such as Walmart and Target, account for the other 60%, and Waldes expects their January filings early next week.
According to the CFO, for the nine local stores that have filed, gross sales were $24 million last month, but $14.6 million in food sales was deducted, resulting in a loss of approximately $437,000 in general fund revenue.
Using those numbers, Waldes said that it is reasonable to expect losses from department store sales of around $655,000 per month, for a total of just under $1.1 million.
“I, as your chief financial officer, am extremely confident that the $1.1 million number that bears out to about $13.1 million give or take over 2024 is actionable, is solid,” he said. “What we have to consider is what we want to do about it.”
With a revised sales tax revenue projection of $52 million in 2024, down from $65 million, there are a few paths forward, Waldes said, including one-time cuts to capital projects and equipment replacement or use of the city’s $18 million fiscal contingency reserve to cover the losses.
But unless the city soon finds another way to replace 20% of its annual sales tax revenue, balancing the budget beyond 2024 will be difficult without permanent staffing, service and capital improvement reductions, Waldes argued.
“We have a full-service city here that provides everything from art on the street corners, to a museum, library, rec center, parks, trails, and on and on,” Waldes said.
“And we have had the lowest sales tax rate on the Front Range at 3%. … I know the things we hear back, that government is wasteful, inefficient, but if we had the lowest sales tax rate and we were fullservice, how inefficient could we have been?”
Waldes said that he and his team are working with city division leaders to find $13.2 million in cuts and hope to come back to council with a more detailed presentation in the coming weeks.
When it came time to choose a path forward, several City Council members floated the idea of going back to Loveland voters to ask for a sales tax increase, now that the full implications of eliminating food tax are emerging. However, Ward 1 representative Troy Krenning said he would not support using budget cuts as a way to pressure voters.
“I don’t want it targeted toward a scare tactic or things we’re going to abolish, unless you give us a tax increase,” Krenning said. “I think it should be not truth in lending, but truth in financing the city budget.”