Glitzy Aspen braces for stormy economic times
Bracing for an anticipated downturn in tourism as the national economy continues to struggle, Aspen’s elected leaders are preparing for the worst.
The Aspen City Council on Monday told top financial administrators to prepare next year’s budget even more conservatively than they were planning on.
City financiers are projecting that sales and lodging tax revenue will grow 4 percent this year and in 2009. But council members say they are more comfortable with a 2 percent growth rate for the city’s most important revenue sources.
Councilors cited rising oil prices that will likely make air travel more difficult and expensive in and out of Aspen. As a result, fewer people will come here.
“Come the fall, there is going to be a market decline for airline service in this resort,” said Mayor Mick Ireland, adding that Aspen’s newest airline carrier may not be able to weather the storm based on information presented by industry observers.
“Frontier Airlines may be a casualty in all of this,” Ireland said, adding sales tax revenues slipped significantly when Continental Airlines pulled out of Aspen in the 1990s.
“We are pretty dependent on airline service,” he said. “We may be in for that, and we need to be prepared. I think sales revenue will be flat or 2 percent … It’s serious.”
Ireland noted that some sectors in the local market already are reporting lower sales figures than last year at this time.
Anecdotally, some restaurateurs have reported a slower June than they had planned for.
City Manager Steve Barwick said he believes the credit and debt problems being experienced by Americans will take years to get through, much like the savings and loan crisis of the 1980s and 1990s.
“It took a long time to get through that and I think this will be” similar, he told the council.
On the upside, Ireland said he thinks the international market will play a key role in injecting revenue into the city’s real estate transfer tax (RETT), which funds the Wheeler Opera House and the housing fund.
And because of the weak dollar in the United States, international travelers will likely come to Aspen to capitalize on relatively inexpensive vacations, Councilman Dwayne Romero said. Still, he said he agrees that a conservative estimate on future sales tax revenues is prudent.
Romero added that he would like city government to be as fiscally conservative next year in capital expenditures.
Romero also pointed out that even though RETT revenue is on a downward trend, three for-sale properties in Aspen ” the Dancing Bear, the Limelight Lodge and the Little Nell Residences ” will come on line at the end of 2008.
The sales of units at those properties will account for half a billion dollars in real estate transactions.
City Hall department heads have been told to forgo plans for any additional employees or any program expansions in 2009. Operating budgets in each department will be limited to increases of 1 percent.
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