Financial board tells county that economy will worsen
August 27, 2002
A group of local business leaders told Pitkin County officials yesterday that they expect economic conditions to worsen over the next several years, not improve as many are predicting.
The prediction, which has important budget implications, comes as the county is gearing up to ask voters for a property tax increase of one kind or another to make up for a growing shortfall in sales tax revenues. Property and sales taxes each make up about a third of the county’s general fund.
In a joint meeting with the county commissioners, members of the county’s Financial Advisory Board said they believed the commissioners should take a more pessimistic view of the near and medium outlook for the economy.
They cited concerns about the stability of the real estate market, business purchasing and inventories, investment patterns, the stock market and other economic indices. The advisory board reached the conclusion that retail sales will not rise, overall, in Pitkin County ? including incorporated areas of Aspen, Basalt and Snowmass Village ? for at least two more years.
“You’re seeing a lot of things that haven’t worked their way through the economy ? perhaps,” said industrialist Marty Flug, a Red Mountain resident.
Flug and others on the board also told the commissioners that county government appeared to be running efficiently, but declined to advise the commissioners on how to convince voters that paying more property taxes is necessary.
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The commissioners are scheduled Wednesday to consider a property tax question for the November general election ballot. The wording of the question must be finalized by Sept. 11 to meet the state deadline for submitting ballot language.
Currently, the commissioners are leaning against asking for a direct property tax increase, instead crafting a question that would allow them to keep and spend between $825,000 and $975,000 in “excess” property taxes collected this year.
The ballot question will also ask voters to allow the county to continue collecting the additional money for several years, perhaps with a 10-year sunset clause. The commissioners are also considering a requirement that property and sales tax collections be reviewed every three years, so they can lower property taxes if economic circumstances warrant.
The money would be spent on a variety of general fund programs, including senior services, roads, restaurant inspections, community development and building departments, the clerk and recorder and assessor offices, the district attorney and law enforcement.
The state constitution sets strict limits on spending by governments, including counties, so their budgets increase only by inflation and growth. If more property taxes are collected than allowed by the formula set by the constitution, the money must be refunded unless voters give the government entity in question permission to keep it.
The county’s current budget crisis can be tied mainly to a decline in sales tax revenues. Throughout the last year, the county has adjusted its sales tax estimates downward three times.
Last fall, when writing this year’s budget, the county Finance Department and commissioners estimated retail sales ? and the taxes they generate ? would fall 5 percent from their 2001 levels. They set this year’s spending accordingly and began making cuts. Six unfilled positions in the county work force were permanently eliminated, and every department was directed to cut 5 percent from its operating budget.
In June, first-quarter sales tax numbers indicated that collections would actually be down from last year somewhere in the neighborhood of 6.5 percent, provided the economy had a relatively strong summer and early winter. Three more employees were laid off, a number of administrative programs went through a second round of cuts, and a countywide hiring freeze was imposed.
Yesterday, the sales tax figures were revised downward once again. County officials are now estimating that retail sales taxes will fall 8.5 percent this year and another 5 percent next year.
The financial board members, who assist the county with revenue projections, acknowledged the property tax burden here is lower than in many places. But they also noted the difficulty of educating the general public about the intricacies of the county budget and the need for a property tax increase.
“It seems that the general fund is the one area in the county budget that gets squeezed in a downturn,” said Chris Ryan, a local investment advisor.
He questioned the sense of allowing the county open space fund to collect more and more property taxes each year, while programs like public safety, senior services and county administration are pressed ever harder.
The county commissioners were quick to point out that the open space and trails funding was untouchable ? and voters meant for it to be that way. They rejected a suggestion from Commissioner Shellie Roy that they lower the amount in property taxes collected for open space purchases to reflect the amount needed to keep basic services intact. She thought the cut might make voters more amenable to the ballot question this fall.
As the commissioners worked their way through various ballot alternatives, they struggled with what services to cut and which to keep so the tax hit on property owners remains minimal.
Should they include paving Owl Creek Road on the list of projects to be eliminated regardless of what voters say, or should they include it on the list of projects that would be saved by a tax increase? Including it on the “saved list” comes at a cost of nearly $700,000.
Should the county include $200,000 in the saved list to pass on to nonprofits that assist battered women, advise young mothers on how to care for their infants and steer troubled youth away from getting in even more trouble?
Currently, the commissioners are poised to include Owl Creek Road and a significant amount of health and human services funding on the saved list. Other items on that list include the animal safety officer, the community relations department, the activities program at the senior center, a full-time noxious weed eradication program manager, the annual contribution to the nordic trails system and free dump day.
If voters approve the ballot question and let the county keep the excess money, everything on the “saved list” will be saved. If they don’t approve, it will all be cut.
“I say we go ahead and cut all these services and say to the voters if you want them back, you need to support this question,” said Commissioner Jack Hatfield.
“I say we word this question to say if you want to keep these services, this is what it costs,” said Commissioner Mick Ireland. “If they aren’t willing to pay for them, then we make the cuts.”
[Allyn Harvey’s e-mail address is firstname.lastname@example.org]