Vail Valley Voices: County’s fiscal crunch coming
July 22, 2010
When you oversee a $100-million-per-year enterprise, you watch the economy very closely. That’s exactly what the Eagle County Finance Department does, and our revenue analysis shows a large projected decline in county revenue in the near future. Of particular concern is the county’s general fund. It is the chief operating fund and holds most funds that are not restricted to specific operations such as the airport, landfill and open-space funds. The general fund revenue forecast indicates a 15 percent decline from the 2010 budget to those projected for 2012. In addition, projections indicate nearly flat revenue for the ensuing three to five years. That translates into a reduction of the county’s general fund budget of $5 million, essentially bringing the county back to 2005 revenue levels.At the request of the county commissioners, we asked the Eagle County Economic Council to assist us in assembling a financial advisory board of local experts to vet our projections and offer up their views of where our county economy may be heading. The board included Ken Marchetti (owner, Robertson & Marchetti), Mike Budd (broker, Prudential Real Estate), Mary Randall (president, Millennium Bank), Rob LeVine (general manager, The Antlers at Vail) and Don Cohen (executive director, Economic Council).Over the past couple of months, the financial advisory board met with the county finance department to offer insights and advice on where they believed the county’s economy was heading. This was the first step in the county’s 2011 budget-planning process, which includes an additional four years of projections through 2015. The question was very simple: How much money could Eagle County expect to take in from property taxes, sales taxes, fees and investments? All of these sources are dependent on our local economic activity, and understanding the potential flow of revenue is necessary to developing a balanced budget.On June 28, the advisory board met with the county commissioners to present their economic outlook through a lively give and take. As Eagle County Commissioner Jon Stavney observed, “It’s unusual and fortunate that our county has the opportunity to get such in-depth economic guidance from local experts.”Eagle County relies heavily on property tax revenues, and many of the advisory board’s comments focused on the decline of property values and the effect it will have on tax receipts. Budd offered an extensive analysis of real estate performance that not only reflected the local parallels of a national decline, but also focused on the unique aspects of a resort market. According to Budd, “Baby boomers have lost $15 million to $18 trillion of net worth that will not be coming back.” Certainly, this may have a dampening effect on the second-home market, which relies a lot on disposable income and higher net wealth. LeVine concurred that he had anecdotally seen units in Vail Village drop from $1,500-per-square-foot prices to $1,000.”It’s a new day in town,” Marchetti explained. “We are no longer thinking the economy will bounce back when it hits the bottom.” Marchetti very carefully tracks the property sales for many of his valley-wide metro districts and has seen valuation drops of 20 percent to 30 percent. Eagle County Assessor Mark Chapin agreed that his office was measuring similar drops, too.Another piece to the puzzle is how well are local businesses performing. Randall observed that “some of the bank’s retail customers had a pretty decent ski season, but others have struggled. There still is a credit crunch for small businesses, as many rely on the value of their homes or business real estate to collateralize expansion loans. Unfortunately, with the drop in property values and higher bar of loan requirements, some of these businesses can’t borrow as they did in the past.””This will take a decade to work itself out,” Cohen said. “We’ve lost jobs and population, and the only thing that fuels growth is the creation of new jobs. We’re simply not going to see the development activity we had in the past decade.” Dan Stanek, the county’s chief building official, underscored that view by noting the precipitous drop in county building permits with large new projects drying up and predominately smaller remodel permits being issued.As our commissioners thanked the advisory board for their hard work and input, they summed up the meeting with a few key points. “We certainly saw this coming last year,” Commissioner Peter Runyon said. “That’s why we started taking steps then to aggressively look at budget reductions.” “But our work’s not over,” added fellow Commissioner Sara Fisher. “We’ve got some tough choices to make this year to make sure we live within our means.”John Lewis is Eagle County’s finance director.