City likely to tighten belt

Uncertainty prompts officials to look carefully at budget

— There are more than a few "boogeymen" to watch out for this budget season.

Uncertain tourist numbers, a newly approved $6.75 million debt load and higher personnel costs all have the city looking nervously over its shoulder as it decides what to spend in 2002.

"We don't know just how many boogeymen are out there," said City Council President Pro Tem Kathy Connell. "That's why we have city staff looking at all possible scenarios."

Connell said the city's budget, like the budgets of many organizations throughout the Yampa Valley, has been imperiled by the recent attacks on the nation and other economic pressures that began before planes started tearing through buildings.

The city budget will likely be even tighter than last year's, based on preliminary estimates from the city's finance department. Though that may not mean city workers will be getting fired or programs cut, items such as community support funding could be slashed. And many capital projects, which are traditionally the last items funded in the budget, will likely be getting the ax once again.

The City Council will still need to make its decisions on the budget on Oct. 2, but the initial numbers tabulated by the city manager and finance director may not leave them much room to improvise.

Connell said city staff will be presenting the council with numerous scenarios to allow it to prepare for the worst while seeing what could happen if the economy stays strong.

The city will likely be dipping into its reserves to the tune of about $900,000. It is attempting to fund about $21.85 million in expenditures with anticipated revenues of $20.94 million, based on city staff's recommendations.

"I'm going to have a hard time approving a budget that goes much further into reserves," Councilman Paul Strong said.

The city decided not to attempt to get a property tax approved this year, meaning it is still relying on a sales tax-heavy budget. Sales taxes have been holding steady so far this year, bringing in 5 percent more revenue than last year at this time, but the increase has been propped up primarily by the bloated utilities industry. Finance Director Don Taylor said the city is budgeting with the idea sales-tax revenues will increase 3.5 percent next year over this year's receipts.

But with tourism experts forecasting a potential downturn in the winter tourism economy, the city's "one-legged stool" of sales-tax revenue looks less certain than ever.

"This is just another sign as to why we need to expand to a more stable budget," Connell said. "To be so dependent on sales tax is not good. Maybe this year will jolt us into recognition."

A study by consultants Yesawich, Pepperdine and Brown about national tourism trends and reactions conducted the day after the terrorist attacks pointed to a potential loss of almost a third of visitors who fly to destinations. Thirty-five percent of the 800 people polled nationwide said they will cancel a domestic trip this year after the terrorist attacks.

"It's hard to believe a situation of this magnitude won't have a negative impact. It's just a question of trying to assess and understand that situation," said Andy Wirth, the vice president of marketing for the Steamboat Ski and Resort Corp.

Wirth said the ski company is not sure what to expect in the long term. Things could turn around as early as January, he said.

Add the potential sales-tax shortfall to the city's new debt load to fund Howelsen Ice Arena improvements, Centennial Hall and a new fire truck, all of which will be paid off out of the city's general fund, and the city could be in a very tight situation next year. Taylor was able to reduce the city's overall debt load with some creative refinancing of airport bonds, but the city will still be picking up the tab for the arena and the new hall over the next couple of decades.

The city is also planning to hire new firefighter/EMS professionals that will upgrade the level of service it is able to provide but will cost more money. Some of those professionals will likely come from existing EMS professionals or firefighters and will be paid for by both the city and the Steamboat Springs Rural Fire Protection District.

Strong said he thinks the city should have gone to the voters to try to pass a property tax for the ice arena, given its popularity and the city's need to get out of the business of funding capital improvements with sales-tax money. But he said he doesn't think the budget picture will be as gloomy as initial numbers may predict, at least in terms of the cost of the new debt load and the erosion of reserves.

"At first blush it looks a lot worse than it is," he said.

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