City of Aspen looks to cut over $16M in spending due to COVID-19
As city financiers estimate a $25 million loss in revenue this year due to COVID-19, they expect Aspen’s economic recovery to take much longer than just this year.
City Finance Director Pete Strecker told Aspen City Council on Monday during a work session that most revenue will take two years to recover, realizing half in 2021 and the other in 2022.
“Assume there’s a bit of a lag in recovery with lodging and sales tax collections and things of that nature,” he said. “It’s not a ‘bounce right back to where we were’ situation, so we have to assume a slower recovery.”
Strecker presented to council a revised 2020 budget, as well as the annual spring supplemental requests that this year amount to $1.2 million.
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While the city plans to cut $16.2 million from the 2020 budget, carry-over and new initiatives are being considered.
Council is expected to vote on the supplemental requests on first reading May 12 and then on a final reading May 18, when public comment can be taken on the proposed ordinance.
The supplemental requests include the city’s 37,500-square-foot office building on Rio Grande Place and three affordable housing projects that combined represent just over $41 million.
City Manager Sara Ott explained the municipal government is required to meet its debt obligations, and continue projects that it has acquired debt for.
“The previous City Council authorized the issuance of certificates of participation to finance the building,” she said. “There is an agreement to deliver a finished building product by a certain timeframe. So, the notion to just be able to stop the project and not spend the money doesn’t work because then we default and to default would mean getting rid of having one of the highest credit ratings for a municipal government, and I don’t think the long-term economic impacts of that doesn’t put this community in a better position today than it would in three years.”
Other expenses in the supplemental request range from bus stop improvements on Main Street in order to secure a state grant, to a handful of ongoing studies by outside consultants, as well as needed repairs at city facilities, including an appropriation for $480,000 to renovate a municipal government-owned house on Cemetery Lane, as well as improvements to other units in the inventory for city employees.
Strecker’s latest revenue loss estimates are $12 million more than what he projected at the end of March.
Back then, it was assumed in a snapshot of time, that the city would lose nearly $13 million in lodging and sales tax revenue, based on a drop of $277 million in sales receipts from local businesses as a result of local public health orders that effectively shut down Aspen’s economy.
But it’s gotten much worse, and some City Council members are bracing for more economic hardship in the months to come.
Councilman Ward Hauenstein said he’s concerned that the latest economic impact estimates coming out of the finance department are overly optimistic.
“I would encourage council to be more conservative and look for deeper savings,” he said.
Strecker said he will be revising his forecasted revenue declines by sector from what he saw in March.
At that time, it was a decline of 34% across the board for 2020, but some sectors like lodging were estimated at 40% down. Restaurants were projected to be down 32%, luxury good sales 53%, construction at 38% and clothing and retail as high as 46% down.
Even if those estimates worsen, it’s time for belt tightening in City Hall, Mayor Torre said.
“This is an opportunity for us to learn how to do business better, more efficiently and really figure out what our core values and core beliefs are, as well as our essential services,” he said, thanking Strecker and Ott’s teams for their hard work since the COVID-19 crisis began in March. “Thank you for the creative thinking that has gone around on multiple avenues for finding out how to deal with this economic crisis that is going to be ongoing for quite some time.”
Not only are the lodging, sales and real estate taxes negatively impacted by limited economic activity in order to slow the spread of the novel coronavirus, but so are the fees for the city’s recreation, golf, parking, and water and electric utility departments.
Strecker said roughly $6 million will be lost in fees and fines across the city’s revenue-generating departments.
“As those types of things play into the health of the funds then we have different reactions we have to take when we look at how to plan for the future,” he said. “What we really tried to focus on was making sure that we limited to the extent possible any community impacts, and we also took actions maybe sometimes more than you think and that’s to preserve our reserves because we don’t know how long this crisis will affect our economy and we want to make sure we have money in the bank to rely upon.”
The city already has laid off 55 part-time employees, and departments have cut their operational expenses by 8%, but bigger reductions are occurring in funds that rely on fees like the golf course and the parks department.
The finance department proposes $2 million in labor cuts, $7 million in operations and $4 million in capital projects as a start.
Strecker said labor savings are being realized in a number of ways, including vacant positions not being filled; positions left open after retirements; rehires at a lower hourly rate; and temporary staff positions that are being held open due to current closures, or to achieve savings.
Bonuses and raises also have been eliminated.
There are more than two dozen capital projects being suspended, including the renovation of the current City Hall, along with improvements to Galena Plaza. Both of those projects are connected to the new city offices at Rio Grande Place.
Other programs like the city’s cardboard recycling collection and compactor also are on the chopping block.
“I don’t think the city will fall to its knees from any of things we’re cutting or delaying,” Councilwoman Rachel Richards said. “We are not putting the car up on the blocks, but we’re definitely hitting a low idle right now.”
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