On the Economic Upswing

While many local businesses are still struggling to keep their doors open after the roller coaster ride of 2020 and the COVID-19 pandemic, owners of local hardware stores and franchises such as the Home Depot and Ace Hardware might come out on the other side with extra padding in their pocketbooks.

Construction and retail trades are leading Santa Fe into a remarkable economic recovery—and within the retail sector, home centers and hardware stores made the single greatest gains in February compared to last year, according to recent economic data from the state.

At a news conference Monday, city staff said taxable gross receipts for February surpassed pre-pandemic levels for the first time, coming in at $261.4 million. That’s 9.1% higher than February 2020 and 4.4% higher than 2018, and translates to a $48,306 increase in GRT revenue compared to last year.

“This is the first time we’ve been headed in a positive direction in a year,” said Budget Officer Alexis Lotero.

Retail saw the most significant spike in economic activity compared to February 2020. The industry made up 30% of total economic activity and increased by $12 million, or 17.9%, from last year.

With new apartment buildings sprouting up all over the city and people taking up home renovation as a popular COVID-hobby, the construction industry is the second largest driver of the uptick in taxable gross receipts. Construction increased by $7.3 million year over year.

Total taxable gross receipts in wholesale trade, professional scientific and technical services, health care, manufacturing and utilities also increased.

Food services and accommodations, however, are still taking a significant hit, even as the state begins to slowly open back up to tourists and entertainment for locals. These industries were down $10.8 million in February compared to last year—a decrease of about 33%.

“That’s a lot of lunches and dinners and night stays at the hotel” that didn’t happen, said Bradley Fluetsch, the city’s CFA planning and investment officer. “But that is a lot better than the 50 and 60% [decrease] we had last summer.”

“We do have some cautious recovery, we’ve seen some real strength in some important industries, and some of our other really important industries like accommodations and food service just aren’t hitting full stride yet, but they’ve made significant improvements,” Fluetsch continued.

The city expects to access other pots of cash over the summer that will further boost the local economy.

Santa Fe is slated to receive around $15 million in federal pandemic relief funds from the American Rescue Plan.

Starting in July, the city will likely also see an increase in gross receipts taxes from internet sales.

In the previous two years, the state divvied up tax revenues from internet sales between municipalities using a calculation likely based on population, said Fluetsch. Santa Fe received a flat sum of $65,000 from internet sales in 2019, and $124,000 in 2020.

Mayor Alan Webber expects that number to increase after the state begins tracking internet sales by jurisdiction and Santa Fe receives revenues from the actual internet purchases made by city residents.

“This is a community where you have a pretty high penetration of computers and internet connectivity and people wanting to take advantage of the convenience, and frankly we know that it is also a part of the COVID response,” said Webber.

There is a two-month lag in the GRT data the city receives from the state. Based on Santa Fe’s vaccination rate and consistent turquoise standing in the state’s red-to-turquoise reopening rating system, along with spending fueled by $1,400 stimulus checked individuals recently received, city staff expect another positive GRT report for March and April and are “cautiously optimistic” that the positive trend will continue into the summer.

However, Webber cautioned that the forecast is based on the assumption that the state and the city will continue to successfully beat back the coronavirus over the summer.

“This [outlook] is contingent upon not having another spike in cases, not having a variant show up in New Mexico that leads to a serious reversion where we’ve got to go into a more constrained mode,” he said, adding that a lot of perks in next year’s budget—such as funding for affordable housing, rental assistance, and employee raises—hang in the balance.

“All of that is predicated on forecasts about the economy making a recovery, and these data for February give us confidence that we are on the right track,” said Webber.