Thread by @shayshinecastle

It's time for #Boulder's annual look at its finances, as well as some economic forecasting for 2023.

Lots o' good info in this: documents.bouldercolorado.gov/WebLink/DocVie…

Before we start, here are the key dates for Boulder's 2023 budget. I expect to see some freaking engagement this year:
Study session: September 8
First reading: Oct 6
Second reading: Oct 20

Basically, the story is one of continued recovery. Sales tax, other revenue is up, though still not back to pre-pandemic levels. Boulder's budget has continued to exceed expectations (which were pretty dire).

The 2020 spending plan was reduced $18.3M or roughly 10.4%

Cost-saving measures included:
- 56 layoffs (including 7 that were in fixed-term positions that ended early)
- 121 furloughs
- 103 vacancy holds

- 6 unpaid holiday closure furlough - all employees (except for Fire, Police, OSMP Rangers). The salary lost was repaid to affected employees in 2021.

And, among non-full-time employees (seasonal, temporary or intern staff):
- 68 terminations
- 472 furloughs

2021's budget ended up being 18.6% higher than originally planned, in part due to higher-than-expected sales tax and COVID recovery $$ from the feds

2022's approved budget (which we're obvs in right now but was planned and approved in 2021) was $462.5M — 35% higher than 2021 ($120.8M more)
- $300.1M operating (10% increase)
- $162.4M capital (134% increase - mostly utility bonds)
- 58.5 FTE added (28 new, 30.5 reinstated)

Sales tax funds most of Boulder's spending.
Comparing 2021 to 2020, sales tax revenue is up 19% ($19,720,235 increase)

But, again, 2020 was hugely down, so it's helpful to compare to 2019: a compound annual growth rate of 4.4% (not as impressive but still good)

One little caveat there: Some of this growth is attributed to more online sales tax being collected - $3.5M or 17.9% of overall increase

Even still, most sectors of sales tax keep growing
- Clothing stores up 39.6%
- Consumer electronics up 33.2%
- General retail up 32.3%
- Eating places up 39.6%

Per staff, “only 3 categories declined when compared to YTD December 2020”
- Grocery stores down by 5.9%
- Medical marijuana down by 34.5%
- Rec marijuana declined by 5.6%

So ya'll are going out to eat more, cooking at home less and smoking less pot, apparently.

Sales tax revenue by location
- Downtown up 36.3%
- Pearl Street mall up by 68.7%
- 29th Street Mall up by 20.6%
- The Hill up by 18.6%

Also a sign of recovery (and how far we have to go)
Accommodations tax (hotels, lodging)
- $6.4M, a 94% increase from 2020 (2019 was $8.8M - so still down by 27%)

Parking revenue
- Up 17.6% from 2020, but still down 43.6% from pre-pandemic levels

Boulder is expecting even more recovery in 2023, but there are some national factors that might impact that:
- High inflation
- Supply chain issues
- International conflict
- Worker shortages
- Drought
- Energy prices

We're hearing more from CU economists Rich Wobbekind and Brian Lewandowski right now on the national and state economies, and what that could mean for Boulder.

U.S. and Colorado's unemployment rates are under 4%, but the U.S. is closer to 6.6% bc of non-participants.

Colorado is in the Top 3 for workforce participation — that is, people who are working or looking for work, which matters bc unemployment doesn't count those who aren't.

Wobbekind: "We're seeing the consumption pattern move back toward what it was pre-pandemic, which was much more service based" (travel, health services, etc.) — it was more goods-based during COVID, bc we couldn't go anywhere or do anything.

Winer asking a bajillion questions at once:
- How has our labor shortage affected things in Colorado? Has there been any impact from COVID deaths, in particular?
- Why are you projecting inflation higher here in the West than elsewhere? Where did you get the growth projections?

Robert McNown answering a q I didn't tweet: Why is 2023's growth projected to be slower than 2022's?

Bc of inflation, basically. It's impacting the stock market, biz investments/activity. Plus no more / less COVID recovery help from the feds.

Housing costs could be contributing to Colorado's higher inflation. And our really tight labor market.

We also have really high workforce participation and low unemployment.

"There's not much more opportunity for drawing more ppl into the workforce," McNown says. That means higher wages, which means higher prices. Inflation!

Wobbekind: "Some people want to attribute it to minimum wage. I'm not in that boat yet."

With a change in federal policy, Wobbekind says, "the question is, does the economy really slow down, or does the economy go into a recession next year?"

When it comes to employment, this is so different from the 2008 recession, Wobbekind said, because people didn't lose their retirement and their homes. Their houses *increased* in value... they don't need to return to work.

Wobbekind: We've seen a dramatic drop in people working 2 jobs only working 2 job. Like 700,000 people working dropping that second job. If that's bc of more hours or better pay, that's a good thing.

But it does impact the numbers.

Wallach: Colorado is No. 1 (out of all 50 states) in terms of average hourly wage growth, but only 28 in terms of annual pay. Why is that?

Lewandowski: The annual hourly wage is based on a new survey, and the annual pay is a census of employers, so it's much more comprehensive and accurate, but it lags. We track both because one is a leading indicator and the other is more accurate.

Wallach: What are the factors that explains why some counties in Colorado are seeing better sales tax growth than Boulder County?
Wobbekind: "Physical growth of housing and population" as well as having big box stores.

Wallach: How did Boulder's employment decline in 2020 but our personal income increase, on average?
It's the stimmy, basically, Wobbekind says: It was all transfer payments from the gov't, trying to support people.

Speer: Income inequality seems to grow coming out of these downturns. What can you tell us about how the people who are already struggling are doing, and how they're going to do over the next few years? Vs. info on how the stock market is doing.

Wobbekind: "You're absolutely accurate. The lower-wage group was hit the hardest. It doesn't necessarily happen every recession that you get that extreme" disparity, with high-wage workers largely unaffected (bc they could work from home).

"That group is v much in demand," Wobbekind says. Wage demand. But bc of inflation, even as these people regain employment and decent income, "a decent income isn't making it anymore, in terms of affordability."

"When I'm thinking about this, how can you support them, it's making sure we get them childcare or whatever is missing from the affordability piece," Wobbekind says.

Speer: Is it really that costs are going up? Aren't many companies still seeing record profits, raising prices bc they can?
Wobbekind: "That may be true for some bigger biz. We have this debate all the time. I certainly don't think it's true for small biz. They're struggling."

Business optimism is much better among big biz, Wobbekind says. Small biz are actually pessimistic right now: Costs are going up, they can't find workers.

"They're struggling just like households are."

OK, moving onto Boulder-specific stuff now. Kara Skinner from the city taking over.

"We are struggling to recruit and retain" employees, Skinner says. So we anticipate some vacant positions will remain open.

Skinner talking a bit about Boulder's emergency reserves. It's had a goal of 20% of the operating budget being held in case of emergencies.

The city has been criticized by some current council members for not using more of its emergency reserves during the pandemic. (Which was, they argue, an emergency.)

Hard to tell from the numbers how much or if they pulled from the reserves... it looks like they planned to, but because revenue came in higher than expected, they still ended up maintaining about 19% in reserves.

They don't like to go below 15%, bc Boulder is so vulnerable to floods, fires and wind damage.

For reference, this means $25M-$30M is held for emergencies each year. That's in addition to the ~$10M often left over for one-time expenses in the general fund

(and the $8M-$15M in "restricted" reserves for various dept and/or programs, like open space — which I think is the only dept with a full 20% in emergency reserves, or at least it was pre-COVID)

Looking ahead into 2023 (the budget process has already begun):
Retail sales tax
- Could exceed estimates by $3.5M-$7.8M in 2022
- Could exceed estimates by $8.5M-$13.8M in 2023

Property tax revenue, which is making up an increasing amount of the city's $$ as values rise:
- Up 5.5% (Residential: 12% non-residential 1%) in 2021, an assessment year

The overall increase was lower: 0.2%, due to adjustment in rates - ag, renewable energy production and residential properties got decrease

While we have seen revenues continually exceed our projections, we budget cautiously, says Mark Woulf.

Boulder is also changing its budget process, to better reflect citywide goals.

We're a very department-forward city when it comes to budgeting, Woulf says. "We see that increment of extra $$ we need to so something, without considering the big picture all the time."

Climate and racial equity goals in particular were called out as examples of citywide goals to be kept in mind while budgeting.

The city will shift toward "programs"-based budgeting, which includes outcomes tied to budgets for particular services, projects, etc.

This will make it more clear *what* (programs/projects) exactly Boulder is spending $$ on — not just *where* (departments)

They've got a fancy new website, too (or will soon) that can show current spending AND make historic comparisons.

That should make my job easier.

Brockett: We have two state laws reducing property tax rates, but the one requires the state to "backfill" lost revenue to local municipalities. Can we get more info on that? On how it impacts the city and home owners and small biz?

That will take some time to get together, but it can happen Woulf says. "We've just glanced at the impact."

Benjamin: We didn't effectively tap our emergency reserves during the pandemic, "the ultimate emergency for our community. The first emergency came, and we didn't tap it." When do we? "The second? The third?" We could have helped people.

Skinner: "I guess I would just reiterate that we did believe we were going to tap into emergency reserves. We were making decisions quickly when our revenue was falling quickly. We didn't have a lot of history to rely on."

"There's a lag to revenue collection," Skinner says. "You are making decisions based on expectations that are v uncertain. From a budget standpoint, we felt like it was better to make some reductions. It's really hard on an org to cut and realize we didn't cut enough."

Chris Meschuk: "We weren't sure how long it was going to last and what was going to happen. We really responded realizing this wasn't going to be a quick shock to the system and recovery."

Meschuk: "I really do think about emergency reserves for those significant shocks to our systems: fires, floods, where it happens so fast and you're quickly into recovery."

"COVID was a shock and then v quickly turned into something that was more than a shock," Meschuk says. That's why we made long-term budgeting decisions.

Benjamin: We barely touched 3% of our reserves. If it's a 10-yr event at 3%, it's still only 30% of reserves that you touch. "COVID was as emergency as we've ever seen."

Benjamin and Speer have expressed that they wish more staff was retained and not furloughed, which would perhaps have helped with retention.

Wallach: "It was a frightening time, and we were making difficult decisions."
Friend: I would "be cautious about Monday-morning quarterbacking" these decisions. I don't think there was any idea we'd get so much federal help, either.

That's it for the budgeting stuff tonight.

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