Boulder’s post-COVID economic recovery lagging

Wednesday, April 28, 2021

Boulder’s post-COVID economic recovery is lagging other Colorado cities, and will likely continue to do so until CU students, tourists and office workers return in full force. The city collected more taxes in 2020 than expected, finance staff said Tuesday, but is still facing a multi-million dollar budget deficit this year and next, which will keep libraries closed and other services form returning in full force through 2022.

As the pandemic descended and ground daily life to a halt, staff prepared for a drastic reduction in sales tax. More than $29 million was cut from the 2020 budgets; another $28.6 million was scraped from the 2021 spending plan.

Year-end 2020 retail sales tax came in at $104 million, 5% above projections. Expenditures, however, still exceeded overall revenue by $9.4 million — a situation likely to repeat itself in 2020 despite continued growth in retail sales.

Employment hasn’t recovered in any of Colorado’s MSAs (Metropolitan Statistical Areas) — Colorado had the 18th-highest unemployment rate in March — but Boulder is down more jobs than anywhere in the state except for Greeley.

View Tuesday’s finance presentation

Across nearly every industry, Boulder has higher unemployment than the state as a whole, but job loss was particularly severe for low-wage workers. These jobs, in restaurants, shops and hotels, evaporated as University of Colorado classes went online, the city’s 64,900 daily in-commuters started working from home and travel became all but nonexistent.

None of those things have returned to pre-pandemic “normals.” Tourism is showing some signs of life, according to the Convention & Visitors Bureau, but while personal travel might rebound, business travel likely won’t.

“It is a very slow and painful and gradual recovery that is expected to take many years, not months,” said Bob Yates, the council’s CVB liaison. “It will take us well into the decade to get back to where we were in 2019.”

CU resumed some in-person classes this spring, and will go full-out this fall. That should help Boulder’s budget situation, said Cheryl Pattelli, the city’s chief financial officer.

The big unknown is still workers. When COVID hit, “over 70% of folks who were commuting into Boulder were no longer commuting into Boulder,” Pattelli said. “How will that change?”

It’s a question many are trying to answer. A Harvard Business School study found that 16% of workers planned to stay at home at least two days per week post-pandemic. Consulting firm McKinsey projected it could be as high as 20% of the workforce going remote, three to five days a week. Those numbers could be higher still in Boulder, with its preponderance of tech and professional service jobs.

That matters not only for sales tax, but property tax as well. If offices and stores sit vacant, property values — and therefore tax revenue — might decline.

Boulder doesn’t live and die by property tax, but it has become a more important source of funding as sales tax growth has declined in recent years, due in part to an aging and shrinking population. Property taxes accounted for 15% of city revenue in 2021; Boulder is expected an additional $2.7 million in property tax revenue in 2022, Pattelli said.

Staff are expecting $7.5-$10.6 million more in the 2022 budget than 2021’s. But expenditures are still expected to exceed revenues that year by $6 million or more, mostly due to lagging sales tax.

“Our initial thought for 2022 is going to be … prioritizing which (programs and services) can come back and which ones can’t,” Pattelli says. “There will be a lot of things that aren’t going to be able to come back.”

The budget process for 2022 begins (for staff) soon. Council will get its first look at next year’s spending plan at a September study sessionA council meeting where members deep-dive into topics of community interest and city staff present r....

Council didn’t offer much feedback. Some were concerned that Boulder was still putting cash into its reserves rather than resuming city services. Two library branches will stay closed for all of 2020, and many Parks & Rec programs have not restarted.

“Those have real consequences for our community,” said Aaron Brockett. “I was a little surprised to see we’re continuing to add to our reserves in a year where we’re cutting so many services. … Think about how we can try to bring those services back, particularly the ones that have the most direct impact on our citizens.”

Read a thread of Tuesday’s finance discussion

Others expressed hope that the city will use federal money to bolster the city budget and its workers. That is one of the city’s priorities for the $20.5 million it hopes to receive as part of the American Rescue Plan Act. Details on what, exactly, the funds can be spent on should be shared by May 11, according to staff.

“Those are broadly defined, said Devin Billingsley, senior budget analyst, “but not to the point we would prefer.”

The money will be doled out in two payments and must be spend by the end of 2024. More information will be presented the next time council touches on the budget: A first adjustment to base at the May 25 meeting, at which time funds will also be allocated for the $2.7 million package of homeless encampment removal tactics that a majority of city council approved Tuesday.

— Shay Castle, boulderbeatnews@gmail.com, @shayshinecastle

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