Credit crunch pressures valley governments to cut
Area governments are trimming budgets for next year in anticipation of dwindling revenues, as the financial crisis sweeps the country.
Carbondale is taking one of the severest stances, budgeting for its first drop in sales tax revenues in years. Other towns are predicting modest growth or flat sales, but none is yet predicting layoffs as they face an uncertain future.
“We’re looking at a couple years, budget-wise, having to tighten our belts,” said Carbondale Town Manager Tom Baker.
In Aspen, sluggish real estate sales, including sales of fractional units, are dealing the city an additional blow. The city’s real estate transfer tax, which funds affordable housing, will drop for the first time in years.
Aspen Finance Director Don Taylor said RETT revenues are expected to be about $6 million this year and again next year, after bringing in $8 million per year for the past five years.
“We’re going to cut back on the projects that we had plans for,” he said.
Communities across the state are experiencing similar pressures. Some cities, such as Aurora and Colorado Springs, are expecting staff cuts. Others aren’t filling vacancies.
“The fact of the matter is, times are tough and local governments, like businesses, are tightening their belts a notch or two more than they’ve generally had to,” said Sam Mamet, executive director of the Colorado Municipal League.
Glenwood Springs, which has long relied on its position as a retail hub, saw its sales tax collections drop from last year’s figures for three straight months. That was the first decrease since October 2004, and it came in June, July and August, usually peak season for the summer resort.
“That’s what we expect to affect us for the next year,” said Glenwood Springs City Manager Jeff Hecksel.
But the Roaring Fork Valley might be somewhat insulated, due to its resort economy on one end and the energy industry on the other, Mamet said.
“The valley is in many ways its own unique state within a state,” he said. “That’s both a curse and a blessing.”
Credit crisis ‘added to the mix’
The city of Aspen, which usually develops its budget based on 4-6 percent sales tax growth, and usually realizes more than that, is budgeting based on only 1 percent this year. It is planning to trim its budget 7 percent.
“It’s not just the credit crisis,” Taylor said. “Oil prices are certainly affecting airlines and prices there. We were concerned even before this credit crisis. This just added to the mix.”
Pitkin County officials are drafting a range of sales tax predictions, from a modest rise to a drop. Snowmass Village is budgeting for flat sales taxes, with plans to re-examine them in around January and again at the end of the ski season to analyze whether revenues might drop further. (See related story, page 3.)
“We certainly know from others that it’s tighter out there,” said Snowmass Village Town Manager Russ Forrest.
‘Tighten the belts’
Basalt is planning for flat sales tax revenues. This year hasn’t been bad, though. Sales tax collections are up about 5 percent. Most years, the town sees 5-7 percent growth.
Town Manager Bill Efting wants to see the town re-examine its budget in about six months.
“What we’re looking at is probably cutting back on capital projects until we know what’s going on,” said Efting.
Carbondale is cutting its budget by 5 percent next year due to an expected sales tax drop. An expected drop in construction will also mean a drop in use taxes paid on big-ticket materials, Baker said.
The town had predicted a 5 percent increase in sales taxes this year over last, he said, and it might make it, but just barely.
“So we have to tighten the belts,” Baker said. “That’s OK. We’ve got good reserve funds if we need them.”
‘It may be zero’
Glenwood Springs’ sales tax revenues are approximately 1 percent more than last year, following several years of strong growth. The town had planned to budget for a 4 percent rise next year, but scaled predictions back to 2 percent.
“The reality is it may be zero,” Hecksel said.
The credit crisis is affecting the ability of some communities, such as Colorado Springs and Steamboat Springs, to obtain bonds, but local municipalities say they have no plans to bond for at least the next year.
The crunch is also limiting the amount that 360 government agencies throughout Colorado, including some local governments, can withdraw from a statewide investment fund. Due to liquidity concerns, the Colorado Surplus Asset Fund Trust is only allowing members to withdraw up to 5 percent of their prorated shares of the $1.9 billion fund, which they use as a sort of checking account to pay for expenses.
Local town managers and finance directors said they are confident in their investments.
“The market isn’t as liquid as it had been,” Aspen’s Taylor said, “but we have our portfolio balanced between longer-term investments and short-term, so we have plenty of cash.”
A silver lining
The upside for local governments is in contract work. In recent years, governments have complained that construction companies have been so busy with commercial work, they haven’t bothered to bid on government work. That’s changing, Hecksel said, and their bids are coming down.
“On the whole, I’d say the news isn’t all that good,” he said, “but there may be a silver lining in the cloud.”
dfrey@aspendailynews.com
