Mt. Crested Butte officials see signs of growth in five-year plan

Darkest before the dawn?

If their “assumptions” about the future of the local economy turn out to be accurate, Mt. Crested Butte town officials expect to see modest growth in the local economy in the next five years, with property values getting worse before they get better and a slow increase in sales tax revenue after 2012.

Town finance director Karl Trujillo, along with Councilmen David Clayton and Gary Keiser, sketched out the latest “five-year plan” to illustrate the town’s cash flow for the foreseeable future.
Trujillo took the plan to the Town Council Tuesday, January 17, telling them that based on observations of the economy and some conservative estimation, property values, which are a big source of revenue for the town and get recalculated every two years, will sink another 10 percent before seeing a 3 percent increase starting in 2016.
“One key assumption is that property tax will decrease by 10 percent in 2014, and we have no idea,” Keiser said. “If it’s 20 percent it’s a huge hit and if it’s 5 percent it’s a big plus. It’s a big assumption.”
After the last assessment, property values across town fell by an average of 32 percent, dropping the town’s property tax collections accordingly for the two years that followed. At the same time, Trujillo said he saw less revenue from building permits, use tax and design reviews than he’s seen in a while.
“This year we’ve only collected about $100,000 [in building revenue], which is as low as we’ve been in years and years,” he said. “Those we’re assuming will increase 20 percent per year until they reach a historical 10-year average in 2016.”
After a slow start to winter, the town is also assuming the sales tax receipts this season will be slightly below where they were between January and April a year ago, “so kind of a drop this winter,” Trujillo said, adding that should turn around by 2013.
“Sales tax will increase by 3 percent starting in 2013 and 2014 and then increases by 4 percent for 2015 and 2016,” Trujillo said. “That’s just what we can see happening over the next five years.” Trujillo said he’s assuming the town’s admissions tax on ticket sales would follow a track similar to sales tax over the next five years.
A quarter of admissions tax fund the town’s share of Mountain Express, along with 1 percent of sales tax, and the remainder will go toward marketing and events, he said.
And despite watching the economy struggle around it, the town of Mt. Crested Butte has been able to build its cash reserves from just over $900,000, or about 31 percent of its operating expenses, to nearly $1.5 million (50 percent of its operating budget) in 2016.
“The more variability you have in your revenues, the more you want to have in reserve so if sales tax were to fall off the edge you’d have something to fall back on,” Keiser said. “That’s something we’ve been trying to do since we started doing the five-year plan, is get our cash reserves up.”
Trujillo told the council that most towns shoot for a cash reserve of 35 percent to 50 percent of operating expenses, while others, like Crested Butte, require 100 percent of operations to stay in reserve.
“Fortunately in these down times we’ve been increasing our reserves,” Keiser said. “The town’s done a good job at keeping expenses down and building reserves even though revenues are down.”
Despite having an end to the down times in sight, the town is still keeping its expenses to a minimum, cutting general fund expenditures by 1 percent this year and allowing increases of 2 percent per year after that.
However, town property owners will still pay 5 mills for the general fund and 5.37 mills for the town’s capital fund, with Trujillo confident sales tax will provide the extra cash for the general fund after this year. The capital fund mill levy will still provide enough to buy a new police car and a few streetlights every year, along with money for new maintenance equipment and road repairs when necessary.
The biggest new expense the town anticipates in the next five years is the Mt. Crested Butte Performing Arts Center, a project the town has partnered with and committed $6 million to. After already investing more than $250,000 and expectations that $300,000 more will be spent by the end of 2014, the town is preparing to bond for the remaining $5,449,300.
“The timing of the required payment and possible terms of bond issuance cannot be anticipated,” Keiser said.