‘Cautious but confident:’ City of Greeley’s tax revenues return to pre-pandemic levels

By Trenton Sperry

John Karner, Greeley’s director of finance, has “good news:” Revenues – especially sales, use and lodging taxes – have returned to levels experienced before the COVID-19 pandemic. However, the news came with a caveat: The next year looks uncertain due to inflationary pressures and talk of a potential recession.

The good and the “cautious” news came during Karner’s presentation to the Greeley City Council during a work session June 28.

“Essentially, big increases (in revenue) across the board,” Karner said, “except for water (rate revenues). In talking with our water folks, unlike tax revenue that’s from economic factors, water is not. Water is driven mostly by weather. And so we didn’t see a big change in that one. But everything else was quite significant.”

A substantial driver of the recovery was new construction at the end of the year, Karner said.

“We saw a big comeback from the dip in 2020 of development impact fees,” he said, “which means that we got a healthy rebound as we recovered on the construction side.”

In fact, the value of building permits in 2021 topped $400 million, returning the city to its six-year trend. Commercial permits make up the bulk of the value at about $150 million, and multi-family and single-family housing permits come in at about $100 million each.

Sales tax revenue increases were aided by a nearly doubling of tax collections from online shopping over 2020. Karner said he knows that seems counterintuitive, but the increase was due to the city adopting a new ordinance in 2021.

“It allowed us to tax online sales even if the entity was not in Greeley,” he said. “So, if someone is selling something and ships it to Greeley, before, it was harder for us to capture that tax. So now, if you’re buying it in Greeley and it’s coming to Greeley, it’s going to get taxed here, regardless of where that’s coming from. … It’s really making sure that we’re equitable and fair across all the sellers inside Greeley.”

But despite all the smiles at a sense of normalcy returning to Greeley’s finances, Karner eventually had to deliver the kicker.

“The bad news: We’re kind of entering a time of uncertainty again,” he said. “If anyone is watching the news, you’ve seen talk about the rise of inflation and the risk of downturns. If you’ll remember, we would use the mantra of ‘cautious but confident’ in 2020. I had hoped we would be out of that. Sadly, because of where we are with economic activity, we probably will stay in that kind of cautious yet confident approach going into (Fiscal Year) ‘22.”

Still, Karner was optimistic that a similar approach from the past couple years will yield more positives for the city.

“I want to reiterate that we are in this position because we were really conservative and took those kind of active approaches in ‘19 and ‘20,” he said. “We’re seeing the results of that now in the late part of ‘21 and ‘22.”

Karner said his department is in the process of meeting with the city’s various departments to review budgetary requests for 2023. He said those requests will be reviewed by the city manager’s office at the beginning of August, and a proposed 2023 budget will be sent to council Sept. 9. A work session on the 2023 budget is set for Sept. 13.

Here are some highlights Karner presented from the 2021 annual financial report:

• Development impact fees in 2021 were up 168% over 2020, an increase of about $11.3 million, representing the largest revenue category of growth by both percentage and dollar value. The city collected $18,075,697 in development impact fees.

• Sales tax collections in 2021 were up nearly 16% over 2020, an increase of about $10.4 million. The city collected $76,259,320 in sales taxes.

• Use tax collections in 2021 were up nearly 32% over 2020, an increase of about $3.3 million. The city collected $13,872,556 in use taxes.

• Property tax collections in 2021 were up nearly 14% over 2020, an increase of about $2.1 million. The city collected $17,423,178 in property taxes.

• Building permit fee collections in 2021 were up about 78% over 2020, an increase of about $875,000. The city collected $2,003,116 in building permit fees.

• And lodging tax collections in 2021 were up about 71% over 2020, an increase of about $257,000. The city collected $620,002 in lodging taxes.