Tale of the tape
September 17, 2010
ASPEN – Times are tough – across the country, around Colorado and in the Roaring Fork Valley. Even Aspen, once considered untouchable by economic crises and bursting real estate bubbles, has been hit by the recession. Jobs have been lost, businesses have closed and tourism has suffered.
“The last year-and-a-half has sent the business community down a long and unsettling road,” says Debbie Braun, president and CEO of the Aspen Chamber Resort Association. “But the good news is, we’ve perservered. There are signs of change and glimmers of hope.”
Some signs are anecdotal: landlords lowering rents so local businesses can get a foothold; new restaurants opening; a smattering of help wanted ads in the local papers. And other signs are concrete: occasional “bumps” in sales tax receipts and, perhaps more important, no major slides in those receipts. In fact, Aspen, Snowmass Village and Basalt are all essentially holding steady overall in the first seven months of 2010, with sales tax revenues on par with 2009.
Still, the reality is the Roaring Fork Valley faces a new reality.
“What is the new normal?” asks Basalt Town Manager Bill Kane. “This is the new normal. Things are not going to go back to what they were before the recession, so we’ve had to adjust. I think that is the bottom line.”
Cases in point: All three municipalities have had to slash their budgets, and will continue to budget conservatively for the coming year, if not years. City officials note this is not optional; it is mandatory if the towns want to stay afloat. Whether or not sales tax receipts continue their slow climb upward, it is unlikely the Roaring Fork Valley – or Anywhere, U.S.A. – will see spending like it did earlier this decade.
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“The shock has worn off, and we have a better idea of what this new economy looks like,” says Snowmass Village Town Manager Russ Forrest. “It may not be what we would like it to look like, but we can begin to adjust our thinking and planning to ensure a healthy future.”
So just what does the future hold for Aspen, Snowmass Village and Basalt? To find out, the Aspen Times Weekly researched 19 months worth of sales tax receipts – from January 2009 through July 2010 – to learn where these communities were when the bottom fell out, where they’ve been in the ensuing months and, if possible, where they’re headed. Sales tax figures do not capture all economic activity in any locality, especially with the rise of e-commerce, but they are a good economic indicator, especially when viewed over time.
So, here is an economic tale of the tape. The real story may lie in the cautious words of those people charged with managing and monitoring the local economy and the tourism trade.
There is nothing glitzy or glamorous about the ongoing recession, even in Aspen. The iconic resort town has been hit just as hard as its Roaring Fork Valley neighbors: At just under $6 million, 2010 year-to-date sales tax receipts are a far cry from the $7.2 million of July 2007.
But, city and tourism officials note, there has been no precipitous drop in these revenues lately. In fact, city of Aspen finance director Don Taylor’s monthly reports point to a slow – very slow – recovery in Aspen.
In March 2010, Taylor wrote: “The current report suggests Aspen’s recent declining economy is beginning to improve”; taxable sales for January, which were included in that report, were up 4 percent. Taylor’s August report commented “Aspen’s economy has stabilized,” and the most recent report “suggests Aspen’s economy is improving.”
To date, sales tax collections are up 1 percent from 2009 through the end of July. And categories that many believe to be a true indicator of a town’s economic health – such as lodging, restaurant/bar and clothing – are similarly up from 2009.
“I think we’re definitely seeing some positive signs – at least more positive signs than negative ones,” says Debbie Braun, president and CEO of the Aspen Chamber Resort Association. “Among those are landlords becoming more accommodating, more activity in the downtown core, and here at the Chamber our phones are ringing with people inquiring about real estate, restaurants, and so on … these are all good things.”
But the battle is far from over. There were still months in 2010 that logged drops in sales tax collections over the prior year. And in some categories, most notably luxury items such as fur and jewelry, double-digit percentage dips were the norm. In many ways, uncertainty is the new status quo.
“I definitely think that what we’re seeing now is some fine-tuning to this new economy,” said Braun. “We’ve hit bottom and now we are turning the knob one way and then the other to find the right balance. It’s been an adjustment, and we will have to continue to adjust.”
However, the Aspen government and local businesses are prepared to adjust. They may not like it, but all agree they are ready for it.
“This is the new reality. And now that the shock is over, I think we will move ahead together to create clusters of activity, of businesses,” said Braun, noting the fact there were six destination weddings in Aspen last weekend, an unusual occurrence even in boom times. “If there is one thing I think we’ve all learned over the last 19 months, professionally and personally, it’s that we are stronger together than alone.
“Now it is time to come together and really dial things in to make sure we all stay afloat.”
Of the upper valley’s three towns, Snowmass Village has been perhaps the hardest hit by the flailing economy. The reasons are myriad – its near-total reliance on tourism and the ongoing financial struggle of the cornerstone Base Village development at the bottom of Snowmass ski area come immediately to mind – but the outcome is singular.
“Our sales tax collections are down,” says Town Manager Russ Forrest.
“You’ve got the numbers and you can see that we’re down pretty much across the board,” he explains. “So like everyone else, especially in mountain resorts where we are highly dependent on sales tax revenues, we’ve had to tighten our belts.”
In fact, the town of Snowmass Village has seen a loss in total sales tax receipts over the prior year in all but four months since January 2008; total collections were down 14.75 percent from the end of 2008 to the end of 2009. But the numbers are not all doom and gloom, with July being the best month yet, says Forrest.
“We’ve seen a mixed picture all along, but we took action and we continue to adjust to this new economy so our budget is balanced,” he explains. “Everybody’s crystal ball is slightly different, so it’s hard to predict where things will go, but we are planning for the worst and hoping for the best in these difficult times.”
Toward that end, Forrest notes positive signs from the town’s financial reports, such as the fact that several months of 2010 showed only single-digit drops in sales tax receipts, with specific categories showing signs of improvement. Restaurants, for example, were up significantly in both winter and summer.
“We see that when we made a concerted effort to bring in business, such as in March, the needle changed,” he says, pointing to an overall increase in sales tax collections for that month of 3.73 percent. “In June, we predicted a loss, and indeed we saw a loss.” June collections were down 11.14 percent over the prior year.
In all, Snowmass Village’s sales tax receipts show a variable picture of where the town is today. With total percentage swings as wide as -30.64 (August 2009) to +5.41 (July 2010) over the past 19 months, Forrest is hesitant to predict what the future holds.
“What does it mean for us? It means we’re going to be very conservative for the next five years,” he says. “We are going to have to continue to adjust, year by year, and we’re going to have to learn to live with a slow economy because this is our new economy.”
July was a big month for Basalt. No, the town did not set any all-time sales records. Nor did it log a multi-million dollar real estate transaction. But, for the first time since late 2007, the midvalley town logged its first increase in monthly sales tax revenues.
“This is very encouraging news,” says Basalt Town Manager Bill Kane. “It sure feels good, and I think that while we’re conservative in our optimism, we’re all relieved to see a positive sign.”
Even more important than the 7.68 percent increase over 2009, according to Kane, is where that increase fell.
In July 2009, Basalt collected $43,396 in sales tax receipts from retail sales; in 2010, that number was $61,121. In fact, retail sales tax receipts have been up in all but one month of 2010 with a “big bump” in July.
“Sales tax collections are just a snapshot; they don’t tell the whole story,” explains Kane. “But when you really look into individual categories, you get an idea of what is happening out there with the economy.”
The rise in retail sales collections is “good news, very good news,” Kane contends.
“Retail sales may not be the biggest number on the report, but it may be the most important,” he says. “It is truly a reflection of how the town is doing – are people shopping, are they out on the streets, are they having fun in Basalt?”
Nevertheless, the economic picture has remained slightly depressed in 2010, with only July showing an overall gain – and January showing a double-digit loss of 14.35 percent from 2009. And important indicators such as retail food, restaurants and lodging show an up-and-down trend for the first seven months of the year, though the past few months have shown signs of improvement. For example, lodging tax receipts were $3,102 in June 2009 and $4,037 in June 2010; grocery sales (cataloged as retail food sales) were essentially even with 2009 in both June and July.
“The actual numbers are important, but what is more important is consistency,” says Kane. “And I think we’re beginning to see some consistency.”
For Basalt, this translates to more solid numbers on which to build a spending plan for 2011.
“I think this gives us a stronger basis and more confidence in creating a realistic budget,” Kane says. “We’re not looking for big numbers, because we’re not going to see them again. But a reliable income stream is important. We’re feeling confident that we’ve hit bottom and that we have recalibrated.
“I think what we’re seeing now is close to our new normal, and that is a step in the right direction.”