Updates to Aspen’s sales tax collections better than March projections
The hit to Aspen’s city coffers because of the coronavirus pandemic are looking better than predicted when the crisis was at its peak locally in late March, but still not great.
City finance director Pete Strecker told the Aspen City Council on Tuesday night that the updated sales tax projections mean the city doesn’t need to look at other budget cuts right now as they review 2020 and begin to discuss a 2021 budget.
Updates presented at the council’s work session now show a 25% drop in taxable sales in the city’s biggest industries overall for 2020. They are projecting $609 million in taxable sales, which is off from the $816 million in the original budget for this year. In late March, Strecker’s department was predicting as much as a 34% drop for the year due to the pandemic’s economic impacts.
“The good news is with the outlook improving a little bit, we don’t need to recommend any additional cuts at this time,” Strecker said Tuesday.
At a council meeting in early May, the finance department proposed $2 million in labor cuts, $7 million in operations and $4 million in capital projects as a start.
July is usually the time that the coming year’s budget starts to take shape. But Strecker asked the council to sit tight on those conversations and they would bring updated data and recommendations to the July 21 council session.
According to the city’s new 2020 projections, the numbers are better because of a few factors that changed: the March projections assumed lodging would be closed longer into the summer, there’s been an “unexpected” pent-up demand for sporting goods, they didn’t anticipate restaurants would have additional limitations, and construction activity escalated with the lift on summer prohibitions.
Strecker said construction projections show a 12% increase for the year from previously predicted in the city’s sale tax. But lodging and restaurants will continue to be well below the 2020 original budget.
Lodging sales still are predicted to be down $100 million for this year (41% drop from 2020 original budget) and restaurant sales down $57 million (40%).
“Where you are not seeing a lot of movement at this point is in those top two categories, which are some of biggest industries,” Strecker said of dining and lodging. “That is a little bit of a concern and what still drags down our overall growth. I call it ‘growth’ but it is a negative territory.”
He said traditional lodging is seeing more competition from the short-term rental market as people come here, mostly driving, and want to stay a bit more confined.
The monthly projections for taxable sales are remain down, but are improved for June and July. The March projections had drops of 58% in each of June and July, but those have been updated to a 45% drop for June and 38% for July from the original 2020 projections.
The months from August to December remain slightly unchanged from the March predictions. Those are seeing a drop ranging from 23% in December to 40% for August.
Before the pandemic hit, the city was up about 8% year over year, but as of May that number has changed drastically and is down 16%.
“What I am seeing, the further you go out I’m still a little apprehensive about really moving the needle upward too dramatically,” Strecker said Tuesday. “With case loads on the rise and a lot of new discussions around different strains and everything else, until you see some concrete movement on a remedy, we have to be a little cautious.”
The 2021 projects for the city’s 2.0% sales tax is currently at $14.98 million, which is nearly $2 million less than previously projected for 2020. Projections for 2021 reflect “slower start and muted activity overall” next year, according to a city memo.
“We are still anticipating that slow recovery period based on these (new) projections and we will keep that in consideration as we talk” about 2021 budget recommendations, Strecker said.
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