Boulder’s economy still in post-COVID recovery

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Saturday, May 28, 2022

Boulder’s budget is almost but not quite back to normal after the devastation of COVID-19. The city could see a return to 2019 revenue next year — if inflation, global and domestic conflicts and other economic challenges don’t derail progress.

“Strategies taken by the city in extremely uncertain times, combined with faster recovering revenue outpacing projections, have resulted in a positive financial position for the city entering 2022 and the 2023 budget development. … The 2023 budget will represent continued recovery from the pandemic with many revenue sources return to or above pre-pandemic levels.”

Sales tax — which funds the biggest chunk of city spending — was up 19% last year as people returned to restaurants, shops and (most importantly) travel. Taxes from hotels, short-term rentals and other lodging were also up.

Sales tax revenue, 2020-2021
Clothing stores up 39.6%
Consumer electronics up 33.2%
General retail up 32.3%
Eating places up 39.6%

Accommodations tax (hotels, lodging) up by 94% ($3.1M)
Short-term rental tax up 103% ($588,000)

By location
Pearl Street Mall up by 68.7%
Downtown up 36.3%
29th Street Mall up by 20.6%
Uni Hill up by 18.6%

In fact, the only thing people are spending less on is groceries and weed, according to city sales tax data.

Grocery stores down by 5.9%
Medical marijuana down by 34.5%
Rec marijuana declined by 5.6%

Despite the strong recovery from 2020, revenue from sales tax is still below 2019 levels by about 4%. Parking and hotel taxes (which make up a smaller share of the budget) are still down 44% and 27%, respectively.

Even so, Boulder’s recovery has been much quicker than predicted. The city was able to add $63.5 million back into the 2021 budget after drastic cuts in 2020, due to higher-than-expected revenue and federal recovery dollars.

They also did not have to touch Boulder’s emergency fund — a move some elected officials criticized Tuesday night, given the hundreds of layoffs and unpaid days off forced onto staff.

2020 staff impacts
56 layoffs (including 7 that were fixed-term positions that ended early)
121 furloughs
103 vacancy holds
6 unpaid holiday closure furlough – all employees (except for emergency personnel in Fire, Police, OSMP Rangers)
Note: The salary lost was repaid to affected employees in 2021
Non-standard (Seasonal, temporary or intern staff):
68 terminations
472 furloughs

“A pandemic is the ultimate emergency,” councilman Matt Benjamin said. “What emergency were we waiting on? We could have used those reserves to really lift up and support our community.”

He and councilwoman Nicole Speer have argued that staff cuts played a role in the city’s high turnover and vacancy rate. City pools have had to reduce summer hours, for instance, due to the inability to hire lifeguards. Assistant Director of Finance Kara Skinner said many jobs were likely to stay vacant next year.

Staff defended its budgeting decisions, noting that it had planned on pulling about $2.5 million from the emergency reserves, but revenue rebounded quickly. Everyone is struggling to keep and hire workers, they said, not just Boulder.

Emergency cash is for sudden and short-term “shocks to our system,” said Deputy City Manager Chris Meschuk. “Fires, floods” — both of which Boulder is especially vulnerable to — “where it happens so fast and you’re quickly into recovery.”

With the pandemic, “we weren’t sure how long it was going to last and what was going to happen,” Meschuk said.

“We were making decisions quickly when our revenue was falling quickly,” Skinner added. “We didn’t have a lot of history to rely on. From a budget standpoint, we felt like it was better to make some reductions. It’s really hard on an organization to cut and realize we didn’t cut enough.”

Boulder has for several years been working toward the goal of having 20% of its operating budget in emergency reserves. The city currently has 19.5% in that fund.

City coffers are expected to keep growing into 2023, but economists are keeping an eye on the war in Ukraine, as well as increasing inflation, growing faster in Colorado than elsewhere.

Rich Wobbekind, CU economist, said “The question is, does the economy really slow down, or does the economy go into a recession next year?”

The city will keep being “conservative” in its spending plans, staff said. The budget process for next year has already begun. Public engagement will begin with a September 8 study session with hearings and votes scheduled October 6 and 20.

Read a thread from Tuesday’s budget discussion

— Shay Castle, @shayshinecastle

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