Aspen eyes deeper budget cuts
ASPEN ” City officials are revising their previous assumptions that sales tax revenue will remain flat in 2009, as it has become apparent that Aspen is far from recession proof.
Financiers in City Hall this past fall budgeted for a 1 percent increase in sales tax revenue. A month later, in November, the Aspen City Council agreed to budget for a zero increase.
But after watching the economy and consumer confidence spiral further downward, the picture is looking more grim.
“The forecast is down 10 to 15 percent for the rest of the winter,” said City Finance Director Don Taylor. “Then it might even out for the summer and next ski season.”
Taylor and other city officials are currently adjusting the 2009 budget and deeper cuts are likely.
Whether city employees get 3 percent raises this year is up for consideration.
“We had wages set to keep up with inflation but we may have to reconsider,” Mayor Mick Ireland said.
City Manager Steve Barwick told The Aspen Times last fall 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.
City Councilman Jack Johnson said the Aspen city government is far below what other municipalities pay their employees. As a result, it would be shortsighted and more costly not to give pay raises in an effort to retain employees, or plan for layoffs.
“It would be really stupid to slam on the brakes and fire people,” Johnson said. “Any responsible organization needs to treat their employees well and I think as far as how we treat people, the government runs better than a business.”
City Councilman Dwayne Romero said he expects all of 2009 to be financially challenging and clearly sales tax revenue will be much lower than first predicted. He added that raises are probably not appropriate, and creative job scheduling like reducing hours and offering unpaid days off could be realities.
“We’re going to have to look at that,” he said.
Additionally, department heads have been asked to cut an additional 5 percent from their budgets, Taylor said.
“We are planning for a 10 percent scenario,” he said of departmental cuts.
Officials are waiting for December sales tax revenue numbers to gauge how severe 2009 cuts will need to be.
“We’ll revise according to what we see,” Ireland said.
December sales account for 15 percent of the annual sales tax revenue for the city of Aspen, and therefore is a month used as a barometer for consumer spending. However, sales tax collections account for about 16 percent of the city’s revenue stream. The predominant revenue comes from property taxes.
Sales tax figures are expected to be analyzed by February ” when the City Council will likely review the 2009 budget, which was set in November.
“We’re working on packages to make reductions,” Ireland said, adding the cuts will likely be considerable. “We are looking at cuts that have the least impact on services and progress from there.”
While consumption-based taxes have shown strong growth in the last four years, it’s evident that sales tax revenue is not going to remain at the same rate.
According to the October consumption tax report, which is the most current data available, sales tax collections year-to-date are up 4.4 percent from 2007. October posted a 12.2 percent decrease from the prior year.
Year-to-date Wheeler real estate transfer tax collections through November are 44 percent behind collections over 2007, and they are 31 percent behind budget. Real estate transfer tax collections that fund the housing program are 44 percent behind collections through November, and 40 percent behind budget.
Taylor said how the nation handles the coming year will be key for the local economy.
“The most important thing for us is how things snap back,” he said.
The council has the ability to revisit the budget at any time, and plans to hold all capital expenditure spending to see how the economy shakes out after the holidays and President-elect Barack Obama takes office.
City officials will provide monthly updates to the council on the state of the local and national economies in an effort to stay abreast of the situation, and the budget assumptions. They will be prepared to make changes as necessary throughout the year.
The 2009 budget adopted by the council in November includes nearly $102.3 million in expenditures, which is 2.35 percent less than 2008.
Most of that comes from a reduction in capital spending, which amounts to $4.1 million in projects planned by about a dozen departments in City Hall.
The city government also has frozen hiring, meaning no new employees will be hired in 2009.
To prepare for a worst-case scenario, the city years ago adopted a policy of keeping enough cash on hand in the general fund to keep city government running for 90 days if revenue sources dry up, and each department in City Hall has a cash reserve as well.
“We have four or five months’ worth in the bank and we might have to deploy that reserve,” Romero said.
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