City projects roughly $23 million in revenue losses; proposes budget cuts in response
The city of Aspen is estimating a roughly $23 million loss in revenue over the rest of this year and proposing more than $2 million in city labor reductions in response, all due to the COVID-19 crisis.
This updated revenue loss projection from City Finance Director Pete Strecker includes an estimated $16.8 million reduction in sales and lodging tax revenue — up from the $12.6 million loss he estimated as of late March — and a more than $6 million loss in fees and fines revenue.
In response to these projected losses, the city asked its departments to look at cutting at least 8% of their labor and operating costs, and all remaining 2019 and 2020 capital projects were reviewed and prioritized.
“The city administration finds that the economic impact of COVID is requiring significant and swift reductions in city expenditures to ensure the city maintains healthy fund balances and can deliver core services during this economic downturn,” states a memo from Strecker and City Manager Sara Ott to City Council.
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Strecker first put out revised sales and lodging tax revenue estimates “reflecting a drop of $277 million in sales base, and a correlating $12.6 million reduction in sales and lodging tax estimates,” compared with what was originally projected over 2020 on March 30.
Since the March revised revenue forecast, February taxes have been remitted and were 7% better than anticipated. But an initial review of March tax filings show “revenue reductions are significant,” the memo to council states.
However, the memo also says the May 1 revised revenue projection stems mainly from declines in fees for services — like recreation and cultural arts programming, golf pass and retail sales and recreation pass and daily use sales — along with real estate transfer tax revenue reductions that were not anticipated before.
And because of the new estimated decline in fees for service and tax revenue reductions, all city departments were asked to look at cutting at least 8% of their 2020 labor and operating costs, with some cutting more than others.
“Some departments are proposing to reduce more than 8%, while others are performing core services that would be negatively impacted by reductions of this size or that would hinder advancing City Council’s COVID recovery outcomes identified,” the memo states.
The city suggested a list of cost-saving measures for departments to review, including layoff of employees, freezing or delaying nonessential staff vacancies, freezing wage increases and discretionary pay and reducing overtime costs.
Departments also were asked to look at reducing operational costs through delaying studies and reducing discretionary training, along with adjusting capital projects. The city also plans to suspend its internal housing program for city employees, which administrators feel will help maintain healthy fund balances, the memo says.
As a result, the city is proposing to cut more than 14%, or roughly $16.2 million of its original 2020 operating and capital budgets. That includes $2 million in labor reductions, $7 million in operational reductions and $4 million in reductions for capital projects.
The city also is spending down the $6 million it allocated from the general fund, housing development fund and Kids First fund in April to provide COVID-19 relief for residents.
Along with the revised revenue forecast for the remainder of 2020, City Council will consider the city’s routine spring supplemental requests at the Monday work session, as well.
The spring supplemental requests are mostly comprised of capital projects that started in 2019 and were already budgeted for, like the new city offices and Rio Grande Building and the three public-private partnership affordable housing projects.
These “capital carry-forward” projects make up 88% of the spring supplemental requests. New project asks that “reflect items previously unforeseen or needed due to changing circumstances” make up 2% of the requests, according to city documents.
City Council will discuss the spring supplemental requests and the city’s efforts to cut spending as a result of the COVID-19 crisis at its Monday work session. The supplemental budget appropriations are set to be presented to council as a formal ordinance for first and second reading May 12 and May 18.
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