Colorado Springs sales tax collections are down for the second month in a row and the third of five months in 2025, according to a report released by the city’s finance department Monday.

Revenues from the city’s tax on consumer and business purchases totaled $20.6 million in June, a 0.88% decrease from one year ago. June’s collections, which reflect spending from the previous month, follow a 1.26% drop in May and a 2.12% increase in April.

The city’s sales tax generates more than half of the revenue the city uses to finance its general fund budget, which includes spending on basic city services such as parks, roads and public safety. As a result, city officials closely monitor the performance of the tax.

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The lagging sales tax revenues are no surprise to local economic experts like Bill Craighead and Tatiana Bailey, who both pointed to persistently high interest rates and economic uncertainty.

“I think the main reason the regional economy has been lackluster recently is the impact of higher interest rates on construction and real estate. Home sales have been slow, and those affect other activity like furniture sales,” said Craighead, the program director of the Economic Forum at the University of Colorado Colorado Springs.

High interest rates have also soured home building sentiment, said Bailey, who is the executive director of Data-Driven Economic Solutions. The city collected $2.8 million from sales taxes on building materials, roughly $550,000 less than it had in June last year. 

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Builders, already facing high prices, have also had to prepare themselves for the impact of tariffs, which could push prices higher still, Bailey said. When taken together, it is “no surprise” to see building materials tax revenue declining, Bailey added.

“In November or December most experts were saying we’re going to have four or five rate cuts in 2025 and now it’s been adjusted to two,” she said. “Investors find it hard to take a project to pencil, whether it’s a new office building, data center or whatever the case may be, if interest rates are high.”

One new source of revenue for the city is a 5% excise tax on all recreational marijuana sales. Voters approved legalizing marijuana statewide in 2012, with sales beginning two years later. Colorado Springs did not allow recreational marijuana sales until approving at the ballot box in November; sales began in April.

The 5% excise tax on retail marijuana brought in $196,346, while the 2% sales tax accounted for a further $154,242, according to the report.

Renze Waddington, who owns local marijuana chain The Epic Remedy, said approaching $200,000 in excise tax revenue is about what he predicted.

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“As the months and years go on, (sales) will pick up. Our sales are showing this week over week, and we must remember other (new) markets took time to mature,” Waddington said. “The 5% is an additional excise tax, so the city collects that and its regular 2% sales tax.”

Lodgers and auto rental tax (LART) collections fell for the fourth month straight. Combined, the city collected $939,799, a 3.8% drop compared to last year.

Visit COS, the marketing agency for the city, is confident that August’s report will be stronger due to attendance at events like the Pikes Peak International Hill Climb and the U.S. Senior Open in June.

“For business travel, we have seen some declines in the first half of this year due to the current restrictions on government travel,” said Visit COS Director of Communications Alexea Veneracion. “The late spring/early summer rainy season has been quite harsh compared to our norm. This primarily impacts our drive market that may decide not to take the trip anymore due to forecasted storms and impacted outdoor activities.”

Despite the headwinds, both Bailey and Craighead said they remain hopeful data from the rest of the summer show healthier economic activity.