Falling revenue projections top budget concerns

City manager: Decline in sales tax revenue appears more severe than after 9/11 attacks

Posted: Friday, November 28, 2008

Juneau City Manager Rod Swope said Wednesday he hasn't refined budget plans since the Juneau Assembly was briefed last week on falling revenue projections, but that it is likely to happen in January as the formal budgeting process begins.

The pace of sales tax collections isn't keeping up with projections, but it's still up over last year - just not by much.

Finance Director Craig Duncan's recent estimates put year-over-year sales tax revenue up from about $40.5 million in the budget year that ended June 30, 2008, to somewhere between roughly $40.7 million and $40.9 million by June 30, 2009.

That's about a half a percent to 1 percent increase over last year, but significantly below the 4.7 increase projected when the city's budget was put together earlier this year.

The last time there was a significant decline in city revenue, Swope said he cut jobs and programs. That decline had to do with the after-effects of the Sept. 11, 2001 attacks. This decline appears to be more severe, Swope said.

In the interim before the new budget is put together, Swope said he asked his staff to delay filling open positions, cut down on travel expenses, eliminate overtime and save energy.

Sales taxes make up about one quarter of the city's $96 million general government budget, which excludes operations such as Bartlett Regional Hospital and Juneau International Airport that the city owns but only indirectly operates. When those operations are factored in, sales taxes make up about 15 percent of the city's overall $290 million budget.

Cruise ship passengers stopping in town and going on excursions generate a significant portion of that revenue. Cruise ship company representatives are tight-lipped about their ticket sales and outlook because of federal regulations tied to stock trading, but Lorene Palmer, president of the Juneau Convention & Visitors Bureau, said unusually low ticket prices offer a clue.

"The fact that they're discounting this early, it looks like bookings are a little soft," Palmer said. "In order to get to capacity they had last year, they've got to cut pretty drastically."

A search on AlaskaCruises.com shows seven-night trips starting for as low as $499 that include up to $50 of bonus credits that can be spent onboard. Typically, those cruises go for $600, $700 or more, Palmer said.

Representatives of Royal Caribbean Cruises and the industry group Cruise Line International Association declined to comment on forecasts and business strategy.

City and industry officials have speculated that even if the number of bookings holds up next year - about 1 million people a year come to Juneau on cruise ships - they might not spend money in town as liberally as they have in the past.

"We're all being subjected to the national economic picture. There's no surprises that people are feeling ... cautious about how they spend their money," Palmer said.

According to a 2005 traveler survey by the McDowell Group, each cruise ship passenger spent $186 on average in the local economy.

• Contact reporter Jeremy Hsieh at 523-2258 or e-mail jeremy.hsieh@juneauempire.com.



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