Tax revenue still in free fall

Chamber official: No rebound until late 2010 or early 2011

Lisa Underwood with Mumzel’s Crumpets Cups & Cones, 101 Third St. in downtown Palisade, takes money from Leif Johnson of Palisade.

Coming off a year in which they experienced the greatest drop in revenue since the oil-shale bust of the early 1980s, Grand Valley governments are paying close attention to what shoppers are spending, knowing those dollars can make or break their budgets.

So far, what they’re seeing in 2010 should cause them to avert their eyes.

Mesa County, Grand Junction, Fruita and Palisade all saw double-digit percentage declines in sales-tax revenue in January, the most current month for which data are available, compared to January 2009. Early reports indicate receipts tallied in February, which should be unveiled next month, aren’t much better.

Some administrators say they slashed enough when they were preparing their budgets last fall to withstand the lean times. But for others, the decline is more precipitous than they expected, and they’re cutting expenses on the fly.

Economy watchers say they don’t expect a sustained rebound anytime soon.

“Right now, everything I’m seeing, everything I’m reading, it looks to me like we’re not going to see a turnaround,” said Palisade Town Administrator Tim Sarmo, who recently implemented a number of cost-cutting measures and advised town employees layoffs are on the table.

Mesa County officials believe they’re still in a solid position, even though county sales-tax revenue is off 24 percent. That’s because budget managers sliced 8 percent from the county’s 2010 budget, eliminated 33 full-time positions going into the year and carried over a $37 million fund balance to serve as a cushion.

County Administrator Jon Peacock said officials expected revenue to be down at the beginning of the year but are keeping a close eye on the numbers in case the downward trend continues.

City officials in Fruita say they think they’re well-positioned, too. The city saw revenue from its 3 percent sales tax inch up 1.4 percent in January, although City Clerk Margaret Steelman attributed the uptick to businesses that were delinquent in their payments catching up.

“It’s fairly early in the year, and I anticipate that we’re going to need another month or two of trends before we get alarmed,” she said.

Fruita City Manager Clint Kinney said officials last year projected the city’s total revenue would decline 32 percent from the end of 2008 through 2010 and compensated by laying off two employees and cutting $600,000 from this year’s budget.

Grand Junction city officials thought they had trimmed enough when they cut employees salaries 3 percent and adopted a 2010 budget that was 3.5 percent lower than the one they ended 2009 with. But the city last month chopped another $5.5 million in spending, largely by not paving streets or replacing curbs, gutters and sidewalks and reducing code enforcement.

City Financial Operations Manager Jodi Romero said although city officials have heard from retailers that business picked up in March, that won’t necessarily translate into a bump in sales-tax revenue.

The town of Palisade proved to be an island in this economic storm last year, posting a 9 percent surge in its municipal sales tax revenue last year. This year, dollars coming in from its 2 percent tax are down just 1 percent compared to last year. But the town’s own sales-tax revenue ($11,800 in January) is only one-seventh of its share of the county’s tax revenue ($79,140 in January). And when town officials projected tax revenue in 2010 to stay flat compared to last year, a 22 percent decline in the first month took them by surprise. It’s a particularly big drop for Palisade because the town’s share of county sales-tax dollars makes up nearly 50 percent of its general-fund revenue.

Sarmo said the town has frozen all non-essential spending and employee overtime, suspended memberships in various associations, subscriptions to publications, out-of-town travel and training and reduced gasoline consumption. Town officials also are prepared to open the municipal pool later and close it earlier this summer to save on staff and operating costs.

“We’re looking at just everything we can do in the area of general-fund operating expenses,” Sarmo said.

He said he has notified the town’s 25 full-time employees that it could include layoffs.

“That’s just not something you can recover from by waiting,” he said of the 24 percent drop in county tax revenue. “Let’s hope the tide changes, but I think it’s only prudent to assume the worst.”

Diane Schwenke, president and chief executive officer of the Grand Junction Area Chamber of Commerce, said she met this week with commercial Realtor groups. They told her they don’t expect to see any sustainable economic growth until the fourth quarter of this year or the first part of 2011.

She said part of the slow recovery is due to political uncertainty, making companies uncomfortable with hiring employees or making capital investments.

“Even the folks who are hiring are doing it on a temporary basis, and so they’re being extremely cautious. And because they’re being so cautious, it’s going to take a long time for a turnaround,” she said.

Schwenke said the local manufacturing sector is beginning to see a bump in orders, and the energy industry is receiving a little more demand nationally. But it’s not a harbinger for other industries.

“The activity we’re going to see in those two sectors isn’t going to be enough to lift everybody else up. And it’s not going to be dramatic. It’s going to be very gradual,” she said.


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