When Dillon staff held a “recession planning exercise” for Dillon Town Council on June 10, they reported that projections showed the town could end the year with $1.1 million less in tax revenue than the 2025 budget predicted.

That outlook has since improved, according to finance director Mary Kay Perrotti. At the council’s Aug. 12 work session, she talked about 2026 budget planning and said updated projections show the town may have a $910,000 sales tax revenue deficit compared to the 2025 budget.

The June projection was a 13% deficit, and the updated August projection is 8%. In June, the sales tax revenue through March was down 8.27% or $233,000, compared to the same time frame in 2024, but Perrotti said the revenue through May is down 4.88%, or $190,000.

“We’ve closed the gap a bit since June 10,” Perrotti said. “Just looking at this from a macroeconomic standpoint, there’s a lot of mixed indicators in the national trends, and it’s very difficult to see a trend here.”

Perrotti said her office projects 2026 tax sales revenue to be flat, or about equal, to 2025 revenues, based on state revenue projections and other data. Uncertainty in areas like interest rates make national trends, and their impact on Dillon, hard to predict, she said.

In June, the council approved deferring $1.1 million in capital projects from 2025 to 2026 because of the projected 2025 budget shortfall. The projection’s improvement did not change Perrotti’s recommendations to keep those deferments and be conservative in 2026 budget planning.

“Most likely what will happen is capital projects we defer for (2025) will defer again in (2026) to (2027),” Perrotti said. “If we get better numbers that come through for the rest of the summer, then we can add some of those projects back.”

Dillon receives sales tax revenue figures on a two-month delay because the state collects the taxes for the town. It had received June numbers a day before the work session, and the finance department had not finished analyzing them yet. 

Perrotti said her department is monitoring some areas closely, like the Best Western in Dillon, since whether it stays in business will affect the hospitality sector in the town. She also said the finance department pays attention to what other towns and the county are projecting for sales tax revenue. 

Dillon’s projections align with those of Silverthorne and Summit County government, Perrotti said, while Frisco’s are more optimistic and Breckenridge’s were unknown at the time of the meeting. 

Silverthorne predicts a 2025 decline of 8% and no change in 2026, just like Dillon, while the county predicts a 9% 2025 decline and no change in 2026, Perrotti said.

A memo written by Perrotti stated the town expects a $7,000 decrease in excise tax revenue from marijuana sales, which were down 8% through June, this year. It has seen a $23,000 decrease in revenue from short-term rental license fees so far this year due to fewer renewals.

Marina revenues, according to the memo, were up $7,000 through the end of July, which “hopefully indicates a slight increase in sales tax for July.”

Perrotti said staff recommends a 3% cost of living salary increase for employees in the 2026 budget. She said it is in line with what other towns are giving their staffs, although it is on the low end of that range.

Town manager Nathan Johnson said other towns are prioritizing giving employees larger raises, even if it means eliminating some staff positions. He said Dillon plans to do the opposite, wanting to retain the “lean” staff that it has now.

“(If) some of these key employees were to leave, it could be quite difficult to go get those newer employees,” Johnson said. “A lot of that’s due to the lack of employee housing.”

Perrotti concluded her presentation by saying her department will use the projections of an 8.27% sales tax revenue decline in 2025, and no change from that revenue in 2026, to create its 2026 budget proposal. 

She said staff will adjust as new revenue figures come in, but pointed out that the council can use supplemental appropriations to adjust the budget even after final approval.

“Whether it shifts to the good or to the not good, we can bring forth different budget changes throughout the year,” Perrotti said.