Basalt projects 15% drop in sales tax from coronavirus crisis
Basalt town government officials estimate sales tax revenue will drop $695,000, or 15%, from what was budgeted this year due to the coronavirus crisis.
The general fund sales tax revenue was projected to grow to about $4.57 million this year. However, now town Finance Director Christy Hamrick and Town Manager Ryan Mahoney now estimate revenue will be $3.88 million.
It’s a big deal for Basalt because sales taxes account for about 60% of general fund revenue. Hamrick warned the Town Council on Tuesday night that the revenue picture would be fluid for months because of all the uncertainties surrounding the coronavirus crisis. For their model, the staff assumed the stay-at-home orders would remain in effect through June and then business would ramp up slowly and steadily through the year. There likely will be adverse budget implications lagging into 2021 and 2022, they estimated.
“We wanted to be conservative,” Mahoney said. “We wanted to set ourselves up to endure what I think will be a marathon rather than a race.”
Basalt businesses, like those across most of the country, are reeling. One advantage for Basalt is the Whole Foods and City Market grocery stores produce just shy of 50% of sales tax revenue. The grocers are essential businesses that remain open during the pandemic, and business has been booming with restaurants only able to offer takeout orders.
Nevertheless, retail food sales are projected to drop 4.4% for the year. Sales by restaurants are estimated to plummet by 50%. Liquor sales are one of the bright spots with a projected increase in sales of 1.5% this year.
Mahoney said prior to the meeting that the town’s sales tax drop would be even more drastic except the first quarter was so strong. The year-to-date revenues through March — which reflect actual sales in December through February — were up $253,000, or 17.3%, above the same period last year. That’s obviously prior to the health crisis and economic fallout.
Overall, the town government’s revenue is expected to fall by $1.66 million in 2020 from the budgeted amount. In addition to sales tax, revenue from building permits and earned interest will fall, Hamrick estimated.
In response, the staff has pared $1.18 million in expenses off the budget amount. For 2020, the town isn’t planning furloughs of employees but it is implementing a hiring freeze. One police officer vacancy will remain and two seasonal positions in public works won’t be filled. Department heads also identified expenses that can be delayed or eliminated.
The town figures it will have to dip into reserves for about $485,000. That will still leave it with a fund balance of about $4.5 million at the end of the year.
Mahoney said Basalt is unable to offer financial aid to help financially distressed residents get through the tough times. Eagle and Pitkin counties and the city of Aspen are undertaking local financial aid efforts.
“The difference between Basalt and some of our larger communities comes down to dollars and cents,” Mahoney told the council.
The town’s operating budget is a fraction of those of other governments in the Roaring Fork Valley. Basalt also needs to hold onto its reserve funds to weather budget shortfalls projected in 2021 and 2022, he said.
Mahoney said the staff is counting on using earmarked funds to help with economic recovery when the time is right. Funds for marketing have been saved from the lodging tax. In addition, the town has funds set aside for special events. Mahoney noted that conventional events might be ruled out this year because of social-distancing requirements and prohibitions on large gatherings, but Basalt could still market to day-trippers from western Colorado, for example.
The budget outlook is bound to change one way or another as the coronavirus crisis plays out, he said, but the staff did its best with projections at this point.
“We didn’t want it to feel completely doomsday and we didn’t want to underestimate it,” Mahoney said.
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