Vail Valley Voices: It’s not business as usual
Vail, CO Colorado
VAIL, Colorado – While, hopefully, our group’s view will prove to be overly pessimistic, it appears that tourism business in Vail in the winter of 2009- 10 could be worse than last year and that there will be little rebound in the real estate-con-struction market until late 2010 at the earliest.
Priorities are meant to be flexible
In light of this sobering backdrop, we are dismayed by recent headlines in the Vail Daily: ” Town of Vail 2010 budget process under way; focus on the council’s top three priorities – housing, parking and trans-portation.”
“Lion-shead may get a new $20 million tran-sit center.”
“Vail has agreed to buy a $280,000 unit in the Gore Range Con-dominium II Building.”
(In addition to two others in the same building purchased in October 2008 for $309,000 and $290,000 – for a total of nearly $900,000!) Tough times require tough deci-sions. We feel it is imperative that the next council reset near-term priori-ties. Vail is being redefined by new economic realities; it is dangerously naive to assume that we will return to things as they were in 2007. Our greatest risk is not that we make a wrong decision but that we continue to maintain a business-as-usual pos-ture and hope.
Balance the operating budget now
Recent discussions to postpone balancing the town’s operating budg-et until 2011 are wrong. Moreover, the 2010 budget revenue assumptions may prove to be overly optimistic. Consider the following points: 1. The original 2009 revenue budg-et for the town was $51 million, down 12 percent from 2008; it is now pro-jected to be $ 42.1 million, a 27 per-cent decrease that is based on sales tax collections being down 15 percent to $16.6 million, which could still be overly optimistic by $500,000 to $1 million.
Moreover, 2010 revenues are being budgeted up 11 percent to $46.7 mil-lion, based on aggressive assump-tions that sales tax will be flat and real estate transfer taxes will be up 77 percent.
2. Despite a $5.9 million drop in revenues, operating expenses for the town were cut only 2 percent in 2009, or $600,000. And salary and benefits are actually budgeted to be up $ 600,000 in 2009! In order to close the actual deficits for 2009 and 2010, the town plans to use $ 3.2 million from the 2008 “surplus” with roughly $800,000 to be used in 2009, $100,000 in the 2010 budget and another $ 2.3 million “unspecified.”
3. This is not a commitment to ” balance the budget” in 2009 or 2010 despite the fact that this economic bust began in 2008. The only plan is to balance the budget in 2011, but to achieve that, the town is projecting revenues in 2011 will be up $ 1.4 mil-lion from 2009 and that operating expenses will actually be $ 900,000 higher in 2011 ( a new record high) than in 2009. In short, we are asked as taxpayers to condone the expendi-ture of $3.2 million of reserves to fund an operating budget that is not being reduced at all despite a $ 3.9 million drop in revenues from the 2008 peak. This is a nonstarter. It is a budget pro-posal that avoids any hard decisions and smacks of business as usual in the face of a serious recession.
4. The fact that we would still have $ 22 million in the general- fund reserve after this financial sidestep is irrelevant. Reserves are meant to be used for an unforeseen emergency or to address longer-term infrastructure necessities. Moreover, these reserves were built up during a decade of prosperity, and we are unlikely to have any opportunity to rebuild them in the foreseeable future.
Time for action
We cannot recall a time that needs leadership as desperately as the pres-ent. Old priorities ( no matter how important) must be reconsidered in light of the unprecedented financial challenges of today. There must be a sense of urgency about making tough decisions, and the council’s agenda ought to reflect these new priorities.
Our suggestions about the 2010 budget: • Balance the 2010 general- fund operating budget now, not by 2011.
The only real way to cut operating expenses is on the “salaries/benefits” line. Salaries and benefits are pro-jected to be $ 18.3 million in 2009 – 62 percent of total general- fund expenses of $ 29.1 million. We would propose the town cut salaries by 10 percent on a ” temporary” basis until it becomes clear how realistic the revenue assumptions are for 2010. This approach has been widely adopted by corporations and institu-tions over the past year and is hard-ly draconian given the 30 percent to 50 percent cuts in incomes experi-enced across the valley. Secondly, employees not needed full time because of seasonally oriented jobs should be asked to take unpaid days off. The objective should be to realize $ 2.5 million to $ 3 million, or 10 per-cent, in savings in the operating budget without laying off anyone. If the winter season of 2009-10 is better than expected, the temporary salary reductions could be reversed next spring.
• Get serious about our looming infrastructure shortcomings.
Discussions about the 2010 operat-ing budget also should be examined and developed in the context of the rapidly declining reserves in the cap-ital projects budget and the Real Estate Transfer Tax Fund. According to the town’s July 16 long- term capi-tal plan memo to the council, the combined reserve balances in those two funds are projected to drop from a surplus of $ 26 million at the end of 2008 to a deficit of $5.4 million at the end of 2012.
Even more alarming, that would still leave a total of $ 61.8 million in identified unfunded capital projects. While this number is probably inflated to some extent by ” wish list” types of projects such as the Simba Run underpass for $ 20 million and $ 22 million for frontage- road and roundabout improvements, which are pie- in- the-sky numbers, the new council needs to discard this mind-numbing list, which has been used for the past few years, and focus on what must be done in the next five years and how we will pay for it.
Moreover, this is where the town’s cash reserves should be used. Frankly, while $ 800,000 of the $ 3.2 million “surplus” already has been earmarked to balance the 2009 oper-ating budget, we strongly urge the new council not to authorize the use of the remaining $ 2.4 million for operations until a realistic capital infrastructure plan is approved.
The members of Vail Citizens for Action are Harry Frampton, Alan Kosloff, John Gorsuch, Johannes Faessler, Kent Logan, Rob Ford, Beth Slifer, Mark Ristow and Axel Wilhelmsen.