Aspen city budget will be shaved considerably |

Aspen city budget will be shaved considerably

ASPEN ” Given the dismal state of affairs in the national economy, Aspen officials plan to shave $6 million off next year’s city budget.

“Declining real estate prices, soaring energy prices, non-functioning credit markets, and financial institution failures dominate the headlines,” wrote City Manager Steve Barwick in a memo to the Aspen City Council. “How will all of this affect Aspen?

“Most experts see the national economy in 2009 in recession or reflecting very slow growth,” he continued. “This, coupled with adverse developments in airline travel is sure to affect us in some manner locally.”

Bill Tomcich, president of Stay Aspen Snowmass and the local liaison to the airline industry, reported on Tuesday that airline prices at the Aspen Airport have increased 34 percent, which doesn’t include extra fees for luggage.

Most of the city government’s cuts will come from stalling capital improvement projects. The asset management plan for 2009 proposes $3 million in projects, which is down $7.9 million from this year. Other projects will be deferred, and could be put on a priority list and funded if the economy improves, said Mayor Mick Ireland.

The city government also will go on a hiring freeze, meaning no new employees will be hired in 2009. And supplemental budget requests from department heads will be kept at a minimum.

The city of Aspen’s budget for 2008 is $84,386,150, which includes operating capital expenses, as well as debt service. The proposed 2009 budget is $78,381,476.

City financiers are forecasting only a 1 percent increase in sales tax revenues for 2009 and 0 percent for the rest of 2008.

While consumption-based taxes have shown strong growth in the last four years, it’s not likely sales tax revenue is going to remain at the same rate. The last couple of months have been down but August experienced a 6 percent increase, Finance Director Don Taylor told the council at its first budget meeting held Tuesday.

“With this in mind the proposed 2009 budget is conservative and policymakers will need to keep a close watch on our key revenue sources,” Barwick wrote in the memo. “We need to be prepared to react if the economy turns worse than the assumptions used in the development of this budget.”

To prepare for a worst-case scenario, the city adopted a policy years ago to have enough cash on hand in the general fund to last 90 days if revenue sources dry up, Barwick said, adding each department in City Hall has a cash reserve as well.

And while Aspen has a history of being resistant to recessions, it’s still affected. Real estate sales volume has decreased 40 percent in 2008 over 2007. The portion of the Real Estate Transfer Tax (RETT) that funds the city’s affordable housing program will see a drop from $9.7 million in 2007 to $6 million in 2008. It’s predicted the RETT will generate $6 million in 2009.

Because real estate sales hit all-time highs in 2004, 2005, 2006 and 2007, it appears the RETT collections have returned to a long-term historic level, according Barwick.

City officials are predicting the RETT will grow at 4 percent annually after 2009.

“We have unprecedented uncertainty in our budget right now,” Barwick said. “It may change a week from now, given the national situation.”

He added that monthly updates with the council on the state of the local and national economy will be held in an effort to stay abreast of the situation, and the budget assumptions.

Barwick said he and his team are predicting a moderate economic downturn locally and planning on inflation. Recession will likely occur but not as dramatic as other parts of the country, he said.

“Most cities are seeing decreases in sales and property taxes,” Barwick said. “We go into [recessions] later and come out of them sooner.”

Nevertheless, City Hall spending will be curtailed. Department heads have been limited to a 5 percent payroll increase from 2008 for all employees, which includes raises and health insurance costs.

Barwick noted that it’s important that the city pay its employees better than other resort towns in order to continue attracting and retaining professional and competent employees. Accordingly, the city’s pay plan is proposed to increase 3 percent.

Department heads were allowed to ask for supplemental requests to their budgets but due to revenue constraints most of them won’t be granted. The requests being considered total $625,840.

Another direct hit will be a big cut in the general fund that contributes to the city employee housing fund ” from $529,260 to $200,000 in 2009.

“Obviously it will be difficult to maintain service levels with this funding proposal but it is prudent to take early action in the face of possible revenue shortfalls rather than wait and have to make bigger cuts later,” Barwick wrote.

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