FasTracks sales tax falls short of projection

Gap may come from retailers failing to collect extra revenue

Kevin Flynn, Rocky Mountain News

Monday, December 19, 2005

The FasTracks sales tax is coming up short of projections in its first year, but not enough to put a dent in the massive $4.7 billion transit construction program.

The tax has brought in $123.8 million through 10 months this year, $3 million less than budgeted.

The gap may be the result of some retailers failing to collect the new 0.4-percent sales tax when it was imposed in January because of lack of awareness or other confusion.

RTD's regular sales tax revenues under its original 0.6-percent rate were virtually dead-on with projections. RTD collected two-tenths of a percent more than it expected from the regular sales tax.

The agency is still accounting for its tax take as two streams. That's because the increase must be spent only on FasTracks projects with the old tax maintaining ongoing operations.

State revenue officials are going through returns to determine where the shortages are and who has to make them up.

But the shortfall isn't critical. There are very few FasTracks expenses this year, compared with the 12-year scope of the program.

"It's something we've been monitoring all year long," said Joe Smith, senior finance manager for the Regional Transportation District.

RTD is undertaking the FasTracks program following voter approval last year. So far in 2005, it has issued contracts for project management, public involvement, and quality assurance for the overall project, and for final design of the first new light rail route, the 12.1-mile West Corridor train from Denver to Golden.

But major construction is still several years away. Next year, workers will start relocating utility lines for a tunnel near Union Station that will handle incoming light rail trains.

RTD had budgeted for revenue of $126.8 million for FasTracks through October. Receiving less than that means the agency will likely realize less in interest earnings on the balance, Smith said.

Regardless, through October RTD had spent only $2.1 million when it had budgeted to spend $3.3 million on the program.

The tax is collected by the Colorado Department of Revenue and remitted monthly to RTD. January receipts are received by early March, and so on. But Smith said when January's dollars came in, the agency saw a discrepancy.

"We noticed we were not receiving the increase that we had expected," he said. "We felt there was some non-compliance going on."

It's a difficult issue to track.

That's because the state sends the tax to RTD in one lump sum. It's collected as a 1-percent sales tax, and not as separate 0.6 and 0.4-percent taxes. But RTD must account for the two separately.

The lump-sum remittance by the state makes it difficult for RTD to know whether the total is short because retail sales are less than expected, or because some retailers are still collecting only the old 0.6-percent amount without the increase.

Some retailers might have been unaware they needed to start charging the tax. If their returns are examined and they are short, they will have to pay the difference.

Donna Stepan of the Revenue Department's Office of Research and Analysis said the state didn't individually notify all retailers in the RTD boundaries about the FasTracks increase. Notice was provided on the state's Web site and in the media, and some out-of-state sellers were mailed notices.

"We know that a whole lot of folks didn't pay," she said. "This isn't unusual whenever a tax rate changes."

flynnk@RockyMountainNews.com or 303-892-5247