Aspen braces for economic downturn
ASPEN ” City officials are battening down the hatches on government spending in order to weather the economic storm that’s expected to hit Aspen in the near future.
City Hall department heads have been told not to plan for any additional employees in 2009, said City Manager Steve Barwick. And the City Council likely will have to make some tough policy decisions to keep costs down next year.
The council is expected to discuss the 2009 budget on Monday. Don Taylor, City Hall’s finance director, said financial success will require a conservative approach.
“The city’s financial condition continues to be healthy despite weak economic conditions in general around the country,” Taylor wrote in a memo to the council. “Nevertheless, prudence calls for a conservative approach to the city’s budget development as there are emerging signs of concern.”
The biggest concern appears to be rising fuel prices and how they are affecting the airline industry, which will undoubtedly increase fares and cut service.
The financial strain on airlines will negatively impact Aspen’s economy, Barwick said, because as it gets more expensive to fly here, fewer people will come and, as a result, less sales tax will be collected.
Sales and lodging taxes, which are city government’s most important revenue sources, currently are strong. Sales taxes are up 10 percent year to date through May and lodging tax revenue is up 13 percent over the same period, according to Taylor.
“Undoubtedly, much of this increase is attributable to the excellent snow year that we had this season,” Taylor wrote, adding the outlook for next year is not as strong. “Sales and lodging taxes are currently projected to increase only 4 percent for the remainder of the year and for 2009.”
Aspen also has been effected by a national real estate downturn, although to a much smaller degree. If it continues, Aspen could see less revenue from the real estate transfer tax that it collects on real estate sales. However, property tax revenue in Aspen is not expected to be effected for the 2008 valuation year.
For 2008, property tax revenue is budgeted to increase 7.7 percent because of continued new construction and rising values from 2006.
Real estate sales activity as measured by dollar volume has decreased substantially in 2008, but values appear to be holding steady, according to Taylor.
Current estimates are for a 3 to 4 percent increase in property tax revenue, Taylor wrote.
Officials are estimating that labor costs will increase at a rate of 5 percent every year through 2012, as will health insurance for city employees. City Hall’s ending general fund balance for 2007 was $9,986,602, which represented 43 percent of general fund revenues for that year.
City Hall’s operating budget for 2008 is more than $47 million, which was a significant increase over the previous year. The city of Aspen operates its budget on a fiscal year calendar, and the council adopts the annual budget in the fall.
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It’s that time of year — hikers and mountain bikers must be aware that seasonal closures are taking effect on multiple trails in the area today for the winter for the benefit of wildlife.