Aspen still feeling effects of recession |

Aspen still feeling effects of recession

ASPEN – Economic conditions in Aspen continue to worsen based on preliminary July sales tax figures presented to the City Council on Tuesday.

Although July’s figures are not finalized yet, it appears that the month will be down 17 percent from the same time last year, according to City Finance Director Don Taylor.

The sector that took a substantial hit in July was accommodation sales, which were down 28 percent. Taylor said that’s likely because of lower nightly room prices since lodges reported occupancy rates were down only between 3 and 4 percent during July.

Mayor Mick Ireland said that reconciles with traffic levels, which were close to the same as last summer. He deduced that a lot of people came to Aspen this summer but spent less money while they were here.

Year-to-date sales tax collections are down 18 percent from last year and Taylor said the current projection is that sales tax will be down 17 percent from 2008.

That’s a far cry from what city officials assumed last fall, which was that sales tax revenue would remain flat in 2009. Prior to that, City Hall financiers budgeted for a 1 percent increase in sales tax revenue. Then in January, Taylor told the council that the forecast was that the city would be down 10 to 15 percent for the rest of the winter, and that summer and the 2009-2010 ski season might even out.

When asked by Councilman Steve Skadron how far off the city was in its projections, Taylor said 7 percent from the original budget and 3 percent from the February adjustments.

“In summary, the recession continues to be deeper and more widespread than anticipated one year ago when 2009 budgets were originally developed and slightly worse than anticipated in the recast which was down in February of this year,” Taylor wrote in a memo to council. “The deep recession that began in late 2007 is having a deep and pervasive impact on the local economy. Revenues from most sources are down from previous years, and construction and tourism is significantly affected.”

Lodging taxes – which fund the city’s transportation system and the Aspen Chamber Resort Association’s marketing efforts – are down 27 percent. The city’s bus service will be cut back as a result.

Real Estate Transfer Tax collections for affordable housing in 2008 was $5.7 million; $5 million is budgeted for 2009. That’s compared to 2006 when $11 million was collected in RETT funds.

Building fees also continue to be well off prior year collections. Current projections for 2009 are about $1.5 million in planning and building inspection fees. In 2005 through 2007, the city averaged about $3.1 million a year.

Lower building activity also has affected use tax collections. Only $720,000 is projected for 2009, compared to the original estimate of $987,000. The money is used to fund transit services within the city.

The council in the next month will begin setting the 2010 budget, which could see significant cuts – much like this year when $2.4 million was shaved and 12 positions within City Hall were frozen, some of which were layoffs.

“2010 will be a tough budget year for us and we need to talk about that soon,” Taylor told the council Tuesday.

Ireland said what’s important is that the council be realistic in its budget and that it set aside enough money to weather economic uncertainty.

Taylor said the city didn’t do that for the 2009 budget, when most of cuts were out of operations and long-term, capital expenditures were spared.

The council then engaged in a philosophical discussion of how to compare the resort community’s success from past years, specifically that 2007-08 was a successful year financially.

Ireland said he remembers the community thinking that from 2002 to 2004 it was in its boom years and then economic conditions got even better. He added that the community has to get away from the boom and bust mentality, which often translates into how well the construction and real estate market is doing.

Skadron said based on an earlier presentation from Aspen Skiing Co. executives who are attempting to bounce back to 2007-2008 levels, the city needs to determine what the correct comparison should be.

“At some point we should decide where we want to be,” he said. “Are we a 2003 city or a 2008 city? …

“Our vision should be commensurate with Skico’s.”

Ireland said boom cycles tend to lead people to devalue frugality and vacationers stop thinking about value. It’s the responsibility of the city and the resort to create a culture that keeps it sustainable for the long run, he added.

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