Basalt leaders see little hope for rosy economy
September 24, 2003
Basalt leaders don’t expect a turnaround in the local economy next year so they will keep a tight belt on the town government’s budget.
The Town Council decided last night that it will set its budget on the assumption that sales tax revenues will be flat and building permit revenues will slide another 38 percent in 2004.
The staff needed the council to make assumptions about the two major sources of revenues so that a draft of expenditures could be prepared.
Town Manager Tom Baker said the council’s conservative approach to revenues was a good idea because a substantially different board – with as many as four new members – could be in place next year. Mayor Rick Stevens and council members Leroy Duroux and Jacque Whitsitt are facing term limits; Councilman Jon Fox-Rubin says he won’t run again.
Baker said the revenues assumption will help the next board avoid a budget crisis in the third and fourth quarters of 2004.
So why the gloomy outlook for next year? A detailed report prepared by Baker and town finance director Renae Gustine laid out factors the council considered. The report’s findings included:
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n The stagnant economy rather than tougher growth controls have stymied land development. Basalt has over 1 million square feet of commercial and residential development that is approved but unbuilt.
“It is therefore not a question of supply, in terms of development approvals, that is preventing Basalt’s economy from growing and a knee-jerk reaction in that direction will only create a greater boom when the economy rights itself,” the report said.
n Sales tax revenues have increased since the end of the war in Iraq, but it appears to be due to new businesses opening. “In general, business in terms of sales tax generation is not much different than one year ago for existing retailers and there are no obvious indicators that point to a significant change in this behavior for the next several quarters,” the report said.
n Other governments in the Roaring Fork Valley have seen sales tax revenues range from flat to down 7.5 percent this year.
n Long-term residential occupancy vacancy rates are higher than they have been in years in the valley. Landlords claim it’s because a substantial number of jobs have been eliminated in the tough economy.
Baker said the Basalt council’s modest expectations for 2003 proved to be fairly accurate. Sales tax revenues will apparently come in about a half percent lower than budgeted, he said. Building permit revenues will be 10 to 15 percent below anticipated levels.
He said he felt the council could count on a 2 percent increase in sales tax revenues for 2004, or a total amount of about $1.84 million. But the council decided to be even more cautious. “I don’t see on what basis we could expect a 2 percent increase,” said Councilwoman Anne Freedman.
The council also directed the staff to count on building permits revenues dropping by 38 percent.
Baker said it is inevitable that a draft of expenditures will be greater than anticipated revenues. In other words, the wish list will be too big.
The council must set funding priorities and cut some items, Baker noted, but it can also dip into reserves. The town coffers include $2.1 million in unrestricted reserves.
“As you can see, the council has extremely healthy reserves and these reserves will give the council flexibility in the 2004 budget to address policy needs,” the fiscal report concluded.
The budget will be finalized in November.
[Scott Condon’s e-mail address is email@example.com]