Leaders wary of economy
September 27, 2008
Three downvalley town governments are reining in expectations for revenues next year because of the mess the national economy is in.
Basalt, Carbondale and Glenwood Springs are all paring back forecasts for sales tax collections in 2009. The vast majority of revenues for the municipalities comes from sales taxes.
Basalt town manager Bill Efting said it is prudent at this time to be cautious.
“It’s a good problem to have more money that you anticipated. It’s a bad problem not to have enough,” Efting said.
Basalt’s sales tax revenues are about 5 percent higher year-to-date than last year, but the monthly collections are showing signs of softening, he said. The town staff was going to propose a budget with a “fairly flat” revenue projection, such as a 2 or 3 percent increase, according to Efting. But even that small increase might be too optimistic, given the national economic meltdown this week. Efting said the staff will consult with the council on revenue projections and potential adjust during budget
hearings that start soon.
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Carbondale Mayor Michael Hassig said the council directed staff in a preliminary budget discussion last month to assume no increase in sales tax revenues. That essentially results in a decrease in the budgetonce inflation is factored in, he noted.
Hassig said Carbondale is insulated from national economic issues to some degree because it isn’t heavily dependent on tourism. The City Market grocery store and Roaring Fork Coop are two of the biggest sales tax producers for the town. Both are local-oriented businesses.
Carbondale has experienced “three or four years” of double digit sales tax revenue increases, Hassig said, and appears likely to collect more again this year. Sales tax revenues were up 5 percent through July.
Like Basalt, Carbondale wants to be conservative with projections. Both town governments have healthy reserves to fall back on, if necessary. Revenues dropped in 2002 when the national economy sagged. Carbondale studied how long it could survive on reserves if that size of decrease continued for successive years.
“We could carry out our current level of service for five years before we would burn through our reserves,” Hassig said. In reality, spending cuts would be made to make reserves last even longer.
Sales tax revenues in Glenwood Springs are up 1.1 percent year-to-date, but they dropped 3.2 percent in June and 1 percent in July, Mayor Bruce Christensen said.
That’s made the town government cautious with projections for next year.
“We’re looking at a 2 percent increase for ’09,” he said.
Glenwood Springs depends more on tourism than Basalt or Carbondale, plus it has a $12 million general fund budget, more than the combined size of the Basalt and Carbondale budgets. It could be more susceptible to a fall in travel and tourism.
The last tough year for local governments was 2002. Basalt was forced to eliminate three positions and cut spending.