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Aspen’s capital freeze looks to be finished

ASPEN – The city’s revenue streams appear stable enough to continue moving forward this year with $3 million in capital improvement projects, the Aspen City Council decided Monday.

City Finance Director Don Taylor updated the council on the city’s financial condition and suggested that it’s safe to release dozens of projects that were put on hold last fall.

When it adopted the 2010 budget, the council decided to be conservative and freeze a number of capital projects, then wait to see how the ski season shaped up and determine whether projected revenues would be realized.

Capital improvement projects are funded through the asset management fund. The primary revenue source for the fund is property taxes, and is a relatively stable revenue stream, Taylor said.

“I believe that funding is stable enough to proceed with these projects,” he said.

He also pointed out that contracts for each project will still require the council’s approval so if the economy goes into a tailspin again, adjustments can be made along the way.

The bulk of this year’s projects will come before the council in April.

Councilman Derek Johnson said he wants the council to think about prioritizing capital improvements and consider the entire list when approving any of them.

Mayor Mick Ireland said it’s smart to get the projects done this year and capitalize on lower costs.

Constructing new gymnastic pits at the Red Brick building is one of the planned projects, but because it will require the gym to be closed for three months this summer, the city expects to lose $35,000 in revenue.

Fitness programs and other activities could be moved to the Yellow Brick building, but available hours would only accommodate about 5 percent of the current programming, officials said.

Taylor told the council that early sales tax returns and the pace of business in town appear to indicate that the Aspen economy is slowly recovering.

Dramatic changes in the Aspen economy occurred in 2008 and 2009: lodging rates and occupancy dropped dramatically, and construction activity came to a standstill, Taylor said.

Comparing 2008 to 2009, sales tax dropped 14 percent, lodging tax dropped 25 percent, and building permits fees are down 42 percent from 2008, according to Taylor. Real estate transfer taxes were also down 47 percent from 2006.

After 15 consecutive months of year-over-year declines in sales tax, December 2009 remained flat from the previous year, and January 2010 was 6 percent over the same month in 2009. Lodging taxes also were up 6 percent in January as well.

Taylor said city financiers are still holding with their earlier forecast of a 1.5 percent increase in sales tax revenue for 2010.

“As the national economy seems to have stabilized so it seems that local retail sales have as well,” Taylor wrote in a memo to the council.

But that’s not the case with the city’s revenue sources related to real estate development and sales, which have taken a huge hit in the past year.

Building permit fees are off to a slow start in 2010. For the first 68 days of the building year, permits are down 71 from an already dismal 2009.

“It is early, however, and there is time to make some of this back up,” Taylor wrote in the memo.

The estimated end balance for the city’s general fund is better than what was previously assumed – $5.4 million versus the budgeted $4.8 million.

However, the city’s minimum fund balance, which was drawn down $102,012 below what the government sets as a policy, still needs to be made up. The council decided to dip further into the fund in anticipation of city departments under spending in 2009 and it’s now recommended to replenish that account.

The parks department did better than expected in 2009, both in terms of cost controls and more revenue coming in. The ending balance for the parks department this year is $2.1 million compared to $1.4 million.

The housing development fund – which is primarily funded by a .5 percent real estate transfer tax – is at about 60 percent of the rate needed to make budget. But Taylor said he expects some large properties to sell, giving the city a windfall in revenue this year.

One of those windfalls will likely be the impending sale of the Limelight Lodge to the Aspen Skiing Co.

Without factoring in possible windfalls, the housing fund’s end balance is budgeted at $923,000.

The city-owned Marolt housing fund also is way off – estimates for rents in 2010 have declined from an original $1.1 million to an estimated $645,590. If occupancy doesn’t return to higher levels, city subsidies might be required, Taylor warned.

csack@aspentimes


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