Timming fat off a skinny budget

Q. How will the city adjust to the economic downturn after Sept. 11? How drastic will cuts have to be?

A. The city’s crystal ball is no better than anyone else’s. We do not know how much the September 11 attacks will affect us.

We have consulted with business leaders to get a sense of the possible magnitude of effect but it is a changing picture.

The outlook for tourism, although still depressing, is better than it was three weeks ago. Barring another terrorist attack, we expect things to improve over time. The ski area has generously offered to share their marketing research with the city so that we can track how the outlook for tourism is changing.

There are predictions that tourism might be down as much as 15 to 20 percent this winter.

Even if that dire forecast is accurate, we need to remember that tourism only accounts for a little over half of the sales tax revenue. And sales tax is about seventy percent of the total general fund revenue.

So the magnitude of the decline in the city’s revenue will be smaller than the magnitude of the decline in tourism.

The City Council has asked the city manager and finance director to develop revenue projections and corresponding cuts in expenses related to a drop in sales tax of 5 to 10 percent. While some cuts will need to be made now, we have decided to review the budget in the spring after we know how the ski season actually went. Many capital projects and items in the community support budget have already been put on hold until this spring budget review.

This enables us to not cut needed projects unless the worst-case scenario comes to pass.

Q. Is this the final straw for the city’s sales-tax heavy budget? Is a city property tax a given for the 2002 ballot?

A. Yes. We have often spoken of our budget as a one-legged stool and the need to add more legs to that stool so we are not so precariously balanced.

We are now witnessing what happens when something cuts that one leg out from under us.

Q. How healthy is the city’s financial picture? Is it all doom and gloom if the tourism economy performs poorly?

A. The city’s financial picture was not rosy before the tragedies of September 11.

Although sales tax revenues have been growing, the rest of the city’s revenues have been declining, leaving the city with little growth in total revenue.

At the same time, expenses have been growing rapidly due to the growth of the city as well as increased employee pay and benefits that all businesses here have experienced.

If the one growing source of revenue starts to fall while expenses continue to increase, the city will be facing drastic cuts in the level of services it can provide.

Q. Will personnel cuts be on the table when Council reconvenes?

A. We will not be laying off any city staff. However, I think that we need to look at everything in the budget to see what makes sense.

The city has experienced an employee turnover rate of 33 percent over the last couple of years.

If we decide that personnel reductions are a wise move, then those reductions can be accomplished through attrition rather than layoffs.

Q. Will the axe fall heaviest on capital projects?

A. Capital projects are usually the first items to go. The reason is twofold.

These projects are usually very expensive, so cutting a few projects can balance the budget quickly. They also are usually not critical to maintaining the basic services the city provides. However, continued postponement of these projects can result in a crumbling infrastructure, higher maintenance costs, and reduced levels of service in the future as the city grows. The city has already been delaying capital projects due to tight budgets. Now this problem will only grow worse.

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