Downtown Boulder retailers have largely rebounded from the pandemic slump, sales tax revenue indicates. The full picture is more complicated.

The economic outlook for retailers on the Pearl Street Mall is relatively rosy despite the lingering downturn in tourism and reduction in the number of workers commuting into town during the Covid-19 pandemic, according to a presentation from city budget managers to the Boulder City Council on Tuesday, May 24.

Businesses on the pedestrian mall have seen sales largely rebound to 2019 levels, before the onset of the pandemic recession, sales tax revenue reports show. The city collected about $4 million from Pearl Street businesses in 2021. 

That’s a relatively small chunk of the $124 million the city collected in sales taxes last year. Revenue from out-of-state sales, which includes online purchases, grew throughout the pandemic and now makes up the largest single source of the city’s overall sales tax revenues, topping $31 million in 2021. 

The economic rebound of Pearl Street comes despite a number of vacant storefronts on the West End. The stretch of Pearl Street from 11th to 9th was closed to cars to make space for outdoor dining. City officials have said they are considering whether to reopen the street to cars as soon as October, depending in part on how businesses are affected by the closure. 

While the city’s sales and use tax revenue reports do not break out each block of Pearl Street, Joel Wagner, the city’s tax and special projects manager for the finance department, said in an email to the Boulder Reporting Lab that retail sales — which include restaurants and apparel and home furnishings stores — in the West Pearl stretch have also recovered to their pre-pandemic levels.

Federal pandemic stimulus money has been facilitating the growth in retail sales, according to Rich Wobbekind, an economist with the University of Colorado Business Research Division. 

“A chunk of that is certainly being driven by the three stimulus checks that were sent to households, the combination of state and federal unemployment benefits, childcare credits and so on,” Wobbekind told councilmembers.

In the coming years, sales tax revenues from retail are expected to continue growing, he said. But the recovery is expected to slow down, and it comes with some uncertainty.

“The circumstances of the economy continue to be very uncertain even though the recovery has been quite strong,” Wobbekind said. 

Wobbekind cited uncertainty at the Federal Reserve regarding an expected increase in interest rates and other policies aimed at controlling inflation, the end of pandemic-related stimulus money and ongoing supply chain issues exacerbated by Russia’s invasion of Ukraine. 

And not all businesses are feeling the boon.

Restaurants in Boulder, which are expected to take longer than other businesses to rebound, have seen some of the highest growth rates in the last year, according to city data. But sales tax revenues from dining establishments are still down from 2019, despite an overall increase in retail sales. One of the reasons is that many workers haven’t returned to their offices in Boulder, Wobbekind said. 

The tourism industry has also lagged behind. The city’s accommodations tax generated $6.4 million in 2021, down from $8.8 million in 2019, according to city revenue reports.

“Consumer pessimism related to inflation, especially travel prices, is growing and could have an impact on summer travel plans and local occupancy,” city staff wrote in a memo published in May.

This is one of the reasons why on-street parking revenue was down 43.6% from pre-pandemic levels, according to city officials. The other reasons include changing commuting habits and the “semi-permanent” street closures. 

Cannabis sales dropped when compared to 2020. One reason, according to Wagner, of the city’s finance department, is that cannabis and liquor sales increased significantly during the pandemic and are now returning back to pre-pandemic levels. 

Overall, while businesses may be recovering well, that is not true for many small businesses. 

“They’re struggling,” Wobbekind told councilmembers. “Wages are going up. All of their costs of doing business are going up.” 

The city has the revenue, but can’t find the staff 

Sales taxes makes up the single largest source of money for the city’s budget, and directly pay for a variety of city programs, such as managing the city’s open space. 

Sales and use tax revenues over the last year came in higher than the city expected, according to Kara Skinner, the city’s assistant director of finance. 

Part of that was due to higher-than-expected revenue from the construction use tax, which the city assesses on construction materials used to build and remodel buildings. Another source was a 2020 marketplace facilitator ordinance aimed at collecting additional revenue from online sales.

Given this bump in revenue, the Boulder City Council approved a plan earlier this month by city staff to spend an additional $37 million this year on top of the already approved $462.5 million budget. This money was used to restore programs cut during the recession and expand new programs, including those aimed at subsidizing the cost of buying a home. 

But while the city was building back budgets for programs, Skinner said the city has had difficulty filling vacancies in order to implement them. 

“We are continuing to struggle to recruit and retain,” Skinner said. “So we do anticipate there will be vacancy savings.”