Aspen to tighten its belt in 2010
October 1, 2009
ASPEN – The Aspen city government is budgeting conservatively for 2010, anticipating that there will be no economic recovery, and that there will be lower revenues and higher operating expenses.
“Forecasts don’t show any sort of turn-around,” said City Manager Steve Barwick during the Aspen City Council’s 2010 budget kick-off meeting Wednesday.
The 2010 budget is proposed to be sustainable and sets aside $5.3 million in the city’s reserve fund, which is 25 percent of all expenditures.
Drawing from that fund will depend on how bad the winter of 2010 is in terms of snow and tourism.
“If we really got into a crisis, we might have to dip into that,” Barwick said. “It’s going to be a tough winter.”
City financiers are proposing to spend $10 million less in 2010 over this year, and are projecting a 1.5 percent growth in sales and lodging tax revenues.
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The proposed budget is $68.4 million, 13 percent less than this year’s. Of that, $45.7 million is in operating costs, which includes employee salaries. Capital improvement projects account for $17.6 million, and debt service is projected to be $5 million.
There will be 9 percent less in expenditures in the operating budget as a result of cuts made this year, which include eliminating 34 positions, freezing wages in 2009 and 2010, and reducing employee benefits. That reduction also reflects deep cuts made in each department this year, and flat or minimal cuts are proposed in 2010.
Revenues are projected at $84 million, a 15 percent decrease over 2009, which will have brought in a projected $99.1 million at the end of the year.
Officials within City Hall predict that revenues from sales and lodging taxes and the Real Estate Transfer Tax (RETT), as well as community development fees, will be similar to 2003 levels.
“This change in the economy is a reset not from one year,” said City Finance Director Don Taylor.
He added that it wouldn’t be until 2016 that the city of Aspen would hit 2008 sales tax revenue figures based on a 4 percent growth rate.
Revenue forecasts show that there will be decreases by 5 percent in recreation; 2 percent in community development; 3 percent in the housing and Wheeler Opera House RETTs, and 20 percent in the use tax.
“It’s going to be cold in 2010, and I’m not talking about the almanac,” City Councilman Dwayne Romero said about projected revenues and cuts that have to be made as a result.
The council previously asked city financiers to provide a scenario that contemplates a 5 percent decrease in revenue from 2010 projections.
If 2010 shapes up to be worse than predicted, furloughing employees could provide savings of up to $250,000 a week, said Ashley Ernemann, the city’s assistant finance director.
However, the finance department and Barwick don’t recommend furloughs because they are considered a temporary solution to a long-term problem that doesn’t contribute to a sustainable budget.
That’s why city officials chose to cut positions and lay off employees this year in order to bring a balanced budget to the council.
“It was time to resize the organization,” Barwick said.
Mayor Mick Ireland said it’s time to survey employees about whether they would prefer more layoffs or furloughs. He noted that they might want to share the burden and avoid more of their co-workers from losing their jobs.
“Morale is important if people know they are sharing the burden,” Ireland said.
The average annual cost increase for health care to the city for its employees is 11 percent, which is why the council is considering passing those costs onto workers through premium increases, as well as introducing a health savings account with a high deductible.
Ireland said it should be made clear that those increased costs are driven by the overall health care industry. And with employees losing benefits, coupled with inflation and increased health care costs, people are going to feel the pain, he noted.
“People’s income is being eroded by these astronomical increases,” Ireland said. “Someone working here has lost ground … in real dollars.”
The capital improvement budget for 2010 is proposed to be 23 percent less than this year’s.
Barwick said his approach asks that the council fund necessary capital improvement projects and not the optional ones. Avoiding critical capital projects could prove to be more expensive in the future if they aren’t done when they need to be, he added.
Projects proposed include $4 million for affordable housing; $2.1 million for housing for city employees; $3.1 million for the proposed Wheeler Opera House expansion; $1.1 million for parks and open space, and $1.1 million for transportation and parking.
The council agreed that the $17.6 million earmarked for capital projects in 2010 should be appropriated but not obligated until the city has a clearer picture of winter season numbers. If sales tax revenue is up, then the money can be released, and certain projects can be executed.
It’s projected that the city will have $54 million in outstanding debt by the end of 2010, with $2.37 million in interest that will have been paid. Taylor said he is looking at a refinancing option that would reduce that amount.
The council is scheduled to meet again Monday for its next budget review.