City of Aspen predicting economic slowdown

Sales tax revenue numbers declining over last year but 12% growth predicted

City of Aspen financiers are heading into the second half of the year bracing for a slowdown in the local economy.

That’s based on several factors, including a slow-down trend in sales tax revenues for the first four months of the year compared with the same time in 2021, City Finance Director Pete Strecker told Aspen City Council during Monday’s work session. While sales tax collections are up for the first four months, those figures are skewed because of the underperformance of lodging and restaurant industries from January through April of 2021.

“We are pacing 56% ahead of 2021 year to date and that sounds like a lot … the two industries, which are really our two big pillars — accommodations and restaurants — are basically double what they were a year ago through this period,” Strecker said. “That is because January and February of 2021 were very soft.”

During those two months the community was just coming out of COVID-19 lockdown restrictions and tourism was muted, Strecker noted.

He said the city and the resort are facing a headwind with increasing fuel costs and staffing shortages in the hospitality sector.

“Pitkin County actually ticked up to over $6 a gallon,” he said. “We are feeling a pretty significant push and crunch from this individual metric and it’s double what it was a year ago.”

He said that while the city is losing ground in sales tax revenue, he still estimated that the municipal government will be up 12% in collections at the end of the year over 2021.

“That’s still a lot of growth and it’s growth off of a very strong 2021, for the rest of the year, it was a phenomenal year,” Strecker said. “Like we said, there’s still a lot of headwinds kind of pushing us back, so we just have to temper expectations a little bit and see how things progress.”

The average daily lodging room rate so far this year is $758, versus $496 in 2021 and $540 in 2019.

Strecker’s update was sort of a precursor to upcoming talks about the 2023 budget in terms of goods and services and labor.

Inflation, which is at 8.6% nationally, will affect goods and services.

“Obviously, the city has to mitigate for some inflation in our budget … more on the energy and commodity side and some of the services side, so it’s just something to be mindful of that we’re fighting this just like the everyday individual in our community,” he said.

The proposed average base budget increase for 2023 is 4%, which will likely account for capital projects, directives from council and labor costs.

The city’s human resources department is planning for merit raises up to 4%, which accounts for cost of living increases, said Alissa Farrell, the city’s administrative services director.

Councilwoman Rachel Richards said mixing merit standards and cost of living make it seem like raises are automatic for city employees.

Farrell responded that that aspect of the city’s total compensation philosophy is under review.

“It’s still industry standard and it still meets our total compensation philosophy,” she said. “I would say our focus has been on pay ranges and moving individuals to have competitive pay and to recruit and retain with our turnover, and it’s a philosophical conversation too and this is what we have done historically.

“I would say in the future it’s something that is on our radar that we would assess.”