Colorado’s historically low snowpack is affecting Vail’s economy, prompting town officials to lower revenue forecasts and recommend millions of dollars in budget reductions for 2026.

In a financial update to the Town Council on Tuesday, workers from the town’s finance and economic development departments said early indicators from sales tax, lift tax, parking revenue and lodging data all point to a softer-than-expected winter season.

But that news came as final sales tax numbers for last year were starting to become apparent, and it looks like — according to preliminary estimates — the town’s revenues for 2025 were more than projected.

“For 2025, we are expecting to perform better than budget, likely meeting or exceeding revenue projections and also realizing savings within capital operations and personnel,” said Carlie Smith, the town’s finance director. “So that is all great news.”

December sales tax collections came in only slightly below last year’s — down 1.3% (about $60,000) to $5.78 million.

“Christmas finished strong,” said Mia Vlaar, the town’s economic development director. “Most retailers, from what I’m hearing, finished relatively flat, and restaurants probably similar, with 2024.”

Lift tax collections in December, however, dropped 14% compared with December of 2024, and daily parking sales through Jan. 25 were down 13.3% when compared with the same period last year.

A January “lodging pulse” survey of 60 lodging partners conducted by Discover Vail, the town’s marketing organization, revealed a sharp rise in cancellations over the past several weeks. Eighty percent of respondents reported at least a slight increase in cancellations, with most citing poor snow conditions as the primary reason.

“Cancellations are certainly on the rise, mostly for January and February, with March still holding,” Vlaar said.

Members of the town’s staff now project sales tax revenue will decline 10% for the remainder of the winter season and 4% for the rest of the year. The revised sales tax projection for 2026 is $40.3 million — a 5% decrease from the what was projected in the 2026 budget. Lift tax revenue is expected to total $6.1 million, down 9% year over year, while parking sales are projected to fall 7% compared with 2025.

To offset revenue losses, staff is recommending $4.45 million in budget reductions across town operations, amounting to about a 2% cut in total expenditures.

The cuts include a 1% reduction in personnel costs ($345,000) through managed vacancies and savings from unused vacation buybacks; a 5% cut to operating budgets across the general, real estate transfer tax and heavy equipment funds, totaling $1.1 million; and a 10% reduction in capital projects within the capital and real estate transfer tax funds, totaling $3.3 million.

The Town Council on Tuesday signaled its approval of the recommendations, which will become official in March, when the council passes its first supplemental budget of 2026.

“I think it’s important that we don’t have our head in the sand for what’s going on and we revisit this in March,” said Mayor Barry Davis.