Carbondale grapples with 23 percent drop in revenue
August 26, 2009
CARBONDALE – Carbondale officials are viewing a projected 23.5 percent decline in general fund revenues as the “new norm” for the next budget year and beyond.
“Given the historical make-up of Carbondale’s economy, it is difficult to see a quick recovery,” Carbondale Town Manager Tom Baker and Finance Director Nancy Barnett wrote in a memo to the Town Board, laying the groundwork for 2010 budget discussions.
“The direct and indirect impacts of a significantly reduced construction sector have been apparent in our 2009 revenues,” they wrote. “While what is happening in 2009 is in some ways an anomaly, the growth in construction that occurred in 2005, 2006, 2007 and 2008 was also anomalous.
“As a benchmark, staff suggests that we view 2009 as a ‘new normal’ … for budgeting in the future,” the memo concludes.
The memo was written in response to a 21.6 percent decline in sales tax collections for the town in June, compared to June 2008.
By the end of the year, the town projects an 18 percent overall decline in sales tax revenues, and an overall 23.5 percent drop in general fund revenues including building permits, use taxes and other revenue sources.
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“July is looking a little bit better than June, but I don’t have final numbers yet,” Barnett said Tuesday. “I have heard a lot of people say July was better, so we remain hopeful.”
Still, “At this point, even if July does come in better, unless we see a dramatic change we’re looking at about a 23 percent drop in revenue for the year,” she said.
Sales taxes alone, which make up about 60 percent of the general fund revenues, are expected to be down 18 percent for the year.
When the downward trend began last spring, town staff identified $618,000 in expenses that could be suspended. That included a $215,000 savings through a hiring and salary freeze.
More recently, staff identified another $226,733 worth of budget-cutting measures, ranging from street maintenance projects and some smaller capital projects to some savings in areas where expenses have come in below budget, according to the staff report.
“The global financial crisis has and continues to cascade through the valley and Carbondale,” Baker and Barnett wrote. “Businesses are cutting back and some have closed. Anecdotal evidence points to a population loss in the Latino community as construction related work diminishes.
“All sectors of the economy have been impacted and as a result spending is reduced due to fewer and less-certain jobs.”
Although sales taxes are down compared to more recent years, they are in line with revenues seen in 2005 and 2006.
“Staff is suggesting that the Carbondale economy is ‘resetting’ at this new level and is projecting 2 percent annual growth for the next five years,” the report also concludes. “This means that the 2010 budget will require a structural change for services and programs.”