Ahead of ski season, Summit County aims to save to offset expected losses
Summit County’s top finance officials reported that the county’s budget situation is slightly better than expected heading into the year’s fourth quarter, but that higher-than-expected revenues now will be sorely needed in coming years as the financial pain wrought by the pandemic is expected to continue into 2021 and beyond.
“(Next year) is going to be a rough year, but I think ’22 is actually going to be a rougher year,” County Manager Tom Fisher told the County Council Wednesday, projecting a slowdown for the economically crucial winter.
County Councilor Glenn Wright shared a more optimistic outlook for the 2021-2022 ski season predicated on the assumption that a COVID-19 vaccine would be effectively rolled out in the meantime. He was less sanguine, however, about the season about to begin.
“This is going to be a bad winter,” Wright said.
Finance Officer Matt Leavitt reiterated that the timing of the start of the pandemic was fortuitous, coinciding with the normal slowdown at the end of the last ski season. The industry’s closure in mid-March in effect chopped about a month off of winter revenue. The 2020-2021 ski season will be the first to be affected by the pandemic from the start.
Park City officials recently estimated sales tax revenue would drop by about half between December and April compared to a normal year. While summer tourism provides meaningful revenue, ski season continues to be the economic driver for the region.
Leavitt said he expects a much slower winter this year, with anticipated revenue drops from a decline in international travel and a significantly changed Sundance Film Festival.
“If those events aren’t putting heads on pillows because they are hosted in multiple cities … or online then they are not supporting our local businesses and economy,” Leavitt wrote in an email to The Park Record.
He said the county’s goal is to break even in 2020, reiterating that the county had already slashed the budget by 12% and is holding open about 16 full-time positions.
Leavitt’s report to the council included sales tax receipts for June, July, August and September and indicated that the numbers were slightly higher in September compared to last year. Generally, Leavitt said, sales tax data lags by about two months, meaning September’s data corresponds with purchases made in July.
Interestingly, the county’s East Side communities reported moderate or strong gains over 2019 sales tax revenues in those months, compared to declines of an average of about 17.5% for Park City over that timeframe, though those municipalities are much smaller.
Two large sources of revenue for the county, the transient room tax and the restaurant tax, approached 20-year lows earlier this year, Leavitt reported. He noted that the industries that generate those taxes — hotels and restaurants — are integral to the area’s economy, making up about 15% of the county’s gross regional product in 2019.
Both appeared to have a strong start to the summer, however, with revenues reported in August and September beating the 20-year average. Given the lagging data, those transactions likely occurred in June or July, Leavitt indicated.
In both industries, revenues had hit record highs earlier this year before the pandemic struck, and Fisher noted the county had been on track for a record-breaking 2019-2020 ski season.
The county’s revenue from things like building permit fees also took a hit, declining by about one-third from the beginning of the year through August, a loss of about $900,000.
Leavitt also reported that the county’s amended budget seems to be on target. Earlier this year, the county cut $5 million from its 2020 budget, which runs from January to December.
The countyis spending money more slowly than it had planned, and Fisher said if that trend holds, it might enable the county to contribute to its fund balances. He indicated those savings would be crucial to absorb the expected drop in revenue from the upcoming ski season.
The county might be able to save up to about $1.5 million this year, Fisher said.
One meaningful source of savings, the council was told, was the hiring freeze enacted in the early months of the pandemic. Fisher said it wasn’t a blanket ban on hiring, but that many positions that had come open naturally through retirements or resignations had been held open to save money on personnel costs, which comprise nearly 60% of the county’s outlays.
After freezing the hiring of an estimated 30 positions in the spring, Leavitt reported that about 16 are still unfilled. Fisher indicated he had reviewed every position that had come open and decided to rehire more than half of them. He added that he had established a goal for how much money to save by freezing hiring and that the county was on pace to meet or surpass it.
“I’ve evaluated those with the department head or the office holder just to see the necessity of balancing trying to achieve the savings vs. ‘We’ve got to keep the lights on and some services,’ and we can’t draw them down too low,” Fisher said.
He indicated it would be hard to sustain lower staffing levels into the future and that even more cost cutting might be necessary in 2021 and 2022.
In the next few weeks, the council is expected to weigh a proposal to issue debt in the form of bonds backed by future sales tax revenue to take advantage of low interest rates. Leavitt indicated that money would likely be put toward infrastructure projects.
Compared to the economic uncertainty the county was facing five months ago, even a mixed report seemed like good news. But Leavitt said the tight budget makes it challenging to deliver the level of service that county elected officials and residents expect, and to absorb unforeseen costs like overtime for plow drivers if it’s a heavy snow winter.
“We don’t want to get too excited just yet about some of our local sales tax revenues being positive,” Leavitt cautioned. “We can still be dragged down by a slow or a bad winter.”
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The Park City lodging industry in recent weeks experienced an uptick in projected occupancy numbers during the dates of the Sundance Film Festival, but the figures remain depressed from a typical year during the largest special event on the city’s calendar.