Vail Town Council to address $10 million budget shortfall for 2020 due to COVID-19

The Vail Town Council will review revisions to the 2020 budget, including decreases in revenue projections and proposed expenditure cuts, to address the economic impacts of the public health crisis during Tuesday’s virtual Town Council meeting.

The discussion is listed as item 2.5 on the afternoon agenda which begins at 1 p.m. with additional action taking place at the evening meeting with second reading of a supplemental budget ordinance listed as 8.1 on the agenda. The evening meeting begins at 6 p.m. Both meetings will be live streamed at www.highfivemedia.org/live-five.

An analysis by the Finance Department estimates the economic impacts related to the COVID-19 pandemic will contribute to a $10 million decrease in total revenues for 2020, or 13.5% of annual revenue streams. Of that total, sales tax represents a majority of the decrease, or $7.2 million. 

In addition to sales tax, other major revenue sources are being adjusted downward for 2020. These include: lift tax, down $1 million; parking sales, $1 million; investment earnings, $300,000; county sales tax, $198,000; project reimbursements, $120,000; and Donovan Pavilion rentals, $90,000.

To offset the projected revenue decreases, the Vail Town Council will review a multi-stage recession plan adopted during the 2020 budget process. The plan addresses five phased approaches from “minor” to “crisis” to proactively respond to escalating impacts to revenue streams. The Finance Department is recommending adoption of a level 3 approach in the “significant” category to address the estimated 13.5% decrease in revenues. This includes limited service reductions, managing staffing vacancies, deferring capital projects, utilizing reserves where necessary and potential merit deferrals and wage freezes.

These recommended budget adjustments are contained in second reading of Ordinance No. 1 which will be considered by the Town Council during the evening meeting. Recommendations include:  

• Utilize $4 million in fund balance to help offset expenditure cuts.
• Refrain from any future employee merit increases for the remainder of the year unless the local economy and revenue expectations improve, a savings of approximately $730,000.
• Reduce operating expenditures by 10%, excluding staffing, a savings of $1.2 million.
• Defer select projects in the Capital Projects Fund and Real Estate Transfer Tax Fund and recognize permanent savings, a combination totaling $18.3 million. 

In a memo to the Town Council, Finance Director Kathleen Halloran notes the staff will continue to monitor financial impacts over time. While this initial round of budget reductions is intended to have minimal changes to services visible by guests and the community, the staff will be prepared to recommend additional actions identified in the next phase of the recession plan as needed.  

Tuesday’s meeting agendas are avalable online.  Public comments are being accepted prior to the start of the meetings by emailing info@vailgov.com.