Colorado businesses trim the sails
Every expense scrutinized to cut next year's budgets
Rocky Mountain News
Published November 22, 2008 at 12:05 a.m.
Photo by Judy Dehaas / The Rocky
Polk Majestic Travel Group: Co-owner Robert Polk says his business has withstood the economic downturn so far, "although we are trending down from last year." Much of his business comes from corporate clients.
Photo by Ken Papaleo / The Rocky
Allied Jewish Federation of Colorado: Glenis Santos and her 6-month-old daughter, Kristal Padilla, get some food Friday at the Weinberg Food Pantry at Jewish Family Services, 3201 S. Tamarac Drive, in Denver. The federation, a philanthropic group, has suspended its $75 million capital campaign for a year.
Photo by George Kochaniec Jr. / The Rocky
New Town Builders: Gene Myers, head of the company, stands at "The Challenge House" in the Stapleton neighborhood. He said proceeds from the home will benefit people "who are a lot worse off than we are."
Colorado businesses are scrutinizing every expense to find ways big and small to cut their budgets -- including laying off workers, turning off lights and canceling holiday parties -- to be able to survive in these dark economic times.
Janus Capital Group
* Denver
* Mutual fund company
* 1,275 employees
The stock market's severe declines in 2008 have forced Janus to eliminate more than 100 jobs, a move that is expected to save the company $15 million a year.
Janus isn't stopping there.
The fund firm plans to slice another $25 million to $30 million of annual expenses by curbing travel, technology spending, marketing and other costs.
The fees Janus and other investment managers reel in are based on asset levels, so when stocks fall and investors withdraw money, revenue takes a hit.
Janus reported that its assets under management dropped to $160.5 billion at the end of the third quarter from $191.8 billion three months earlier.
Level 3 Communications
* Broomfield
* Communications carrier
* 5,600 employees
Level 3 recently installed an additional 30 high-definition video conference systems at its Broomfield headquarters and other locations ranging from London to Atlanta to reduce travel expenses.
In tough times, people tend to communicate more, said Level 3 CEO Jim Crowe. "Less travel, more communications. We're doing that."
That's not all, said Level 3 spokeswoman Debra Havins. Level 3 is redesigning work stations so they can be used by more than one employee - such as salespeople who are out of the office frequently a la the "hoteling" concept.
The company is being more selective in attending trade shows and has gone to a just-in-time inventory system for office supplies and network equipment.
Level 3 also is doing things such as consolidating subscriptions to business publications; asking employees to turn off computers and lights when they leave the office; lowering temperatures in offices overnight and on weekends; and looking at providing reusable items in kitchens and break rooms.
Level 3 has scaled back its holiday parties in recent years and those continue to be smaller, departmental parties, many held over lunch.
United Launch Alliance
* Centennial
* Aerospace
* 1,800 local employees
Even the high-flying aerospace business is coming back to Earth because of the economic slump. Tighter federal budgets helped prompt United Launch Alliance to announce it would cut 350 jobs, or nearly 9 percent of its national work force, in February.
The Centennial-based rocket- launch company also said it may have to cut 350 more jobs by the end of 2009.
ULA, a Lockheed Martin-Boeing joint venture, launches satellites for Uncle Sam. It employs 1,800 in Centennial and Jefferson County and 4,200 nationwide.
Spokeswoman Julie Andrews said ULA is planning its 2009 budget.
"In every budgeting cycle you always plan carefully," she said.
Andrews added that no decision has been been made to make cuts in specific areas such as travel, expense accounts and professional-development activities such as conferences and journal subscriptions.
Year-end celebrations also are not on the chopping block. But nobody is pulling out the stops.
"We do not plan lavish year-end events," Andrews said.
Moreland car dealerships
* Thornton
* Car dealer
* 600 employees in Colorado, 1,000 employees in Arizona
The tough economy has not forced "Dealin' " Doug Moreland to lay off employees or slash advertising spending, at least not yet, but it has driven the well-known car dealer to cut other costs.
"We've analyzed every expense," he said, "and we've cut everything that wasn't necessary to selling vehicles and taking care of customers."
Moreland said he has delayed upgrading computers, cut inventory to reduce borrowing costs and held off on "enhancing employee benefits" as much as he would like. The veteran dealer, who has five new-car stores in Colorado and sells Dodges, Mitsubishis, Kias and other vehicles, also said he has demanded lower prices from vendors and changed them in some cases.
"I hate to do that because they got to make a living too," he said.
A decline in consumer confidence and a credit crunch have hurt car dealers, and Moreland is no exception. Moreland said he is faring better than some of his competitors, but total sales at his stores in Colorado and Arizona are down 10 percent to 15 percent this year.
New Town Builders
* Denver
* Home builder
* 20 employees
Gene Myers said not everyone on his staff was on board with the idea of building a $548,900 house in Stapleton and donating all the profit to the nonprofit Challenge Foundation at a time when employees at his company, New Town Builders, were being laid off.
"But the truth is, (building the house) does not materially affect our company," Myers said. "What it does do, is get our employees focused on something positive. It shows we can still go out and do some good. And the proceeds, probably around $300,000, will help people who are a lot worse off than we are."
Myers said he was forced to "face the music" before other builders because the Southern Ute tribe, which had bought 49 percent of his company, pulled its financing almost a year ago.
Since then, he's cut his office staff to about 20 employees from a peak of about 70. He cut his office space at 1553 Platte St. to about 4,000 square feet from about 15,000 square feet. He moved his design center from Platte Street to less expensive space on Gaylord Street.
"There is no fat at this company," Myers said. "One thing we did not cut were employee benefits, like health care."
He said he worries what will happen to people he laid off if they get sick and have no health insurance.
He also is focusing on building less expensive houses that are still energy-efficient, and wire them for the future installation of things such as solar panels or wind turbines, to make sure they do not become "energy obsolete" and lose value for that reason.
He plans to build homes that will have mortgages below $417,000, so buyers do not need jumbo loans, which are priced at about 9 percent, compared with 6 percent for conventional loans.
Frederick Ross Co.
* Denver
* Commercial real estate brokerage
* 230 employees
Three years ago, the mantra in the Denver commercial real estate market was: "Survive 2005 and things will be great in 2008."
Things haven't been so great in the commercial real estate world because of the global credit crisis, but Denver is in better shape than most cities.
"No one has come out with a saying for this year yet," said Jack Box, president and CEO of the privately owned Frederick Ross Co., the largest Denver-based commercial real estate brokerage firm.
Box said the company is "making prudent adjustments," which have included a few layoffs and "significant" pay cuts for the top executives and smaller ones for brokers who also are minority owners.
"As far as pretty visible things, we canceled our annual Christmas party, which is usually a big wingding at a country club," Box said. "And the broker incentive trip, usually to Hawaii or Mexico - we are deferring that for a year."
This downturn pales against the one in 1988, when Box took over the reins at Ross.
New Belgium Brewing Co.
* Fort Collins
* Craft brewer
* 320 employees
The free beer and other employee perks are still flowing at New Belgium Brewing Co. But the Fort Collins craft brewer is keeping a closer eye on its expenses and is prepared to rein in its travel budget.
"Travel especially seems like an area where everyone in business can tighten up," said New Belgium spokesman Bryan Simpson.
"There are so many conferences, seminars and award ceremonies that can be conducted online these days."
He added that while no specific travel guidelines have been set, New Belgium "will probably address this on a case-by-case basis as needed."
New Belgium hasn't resorted to layoffs or salary freezes. But employee bonuses are subject to the whims of the economy and the beer drinking public. Bonuses are based on whether the company hits its per-barrel profit target each quarter.
Red Rocks Data Center
* Morrison
* Data storage center
* Five full- and part-time employees
Red Rocks Data Center just installed a system that pulls in mountain air from the outside to cool customer computer servers. Company executives estimate that more than 80 percent of the center's cooling can be accomplished through the system, cutting costs to one-sixth of its previous conventional air-conditioning system.
The company also is planning to add duct work to capture hot server air and use it to heat its office during the winter, virtually eliminating overall heating costs.
Red Rocks planned to do these things before the current financial turmoil in efforts to be more "green," but the cost savings are even more critical now. And the company is taking advantage of the weakening economy to expand at a lower cost.
"We are looking to actually expand by picking up some 'just-like-new' data center equipment from data centers that are going out of business," said managing partner Tom Nats. "The equipment (which includes an uninterrupted power supply generator) is less than 2 years old, and we save at least 50 percent on it."
In fact, Nats estimates the company will be able to do its expansion for less than $120,000 - compared with $500,000 if it bought the equipment at retail.
Allied Jewish Federation of Colorado
* Denver
* Philanthropic organization
* 40 employees
Doug Seserman canceled plans to be part of a mission to Israel last week, staying behind to conserve his group's travel funds and to deal with more pressing matters at home.
The CEO of the Allied Jewish Federation of Colorado sat down with his board Thursday to present an "economic response plan," a strategy that involves everything from cutting jobs to shifting gears on fundraising. This year's holiday party plan: a potluck dinner at his house.
"We're trying to be proactive and not have our heads buried in the sand," Seserman said. "Charities shouldn't be assuming business as usual. Everything changed as the economy changed."
The first order of business for the philanthropic group was to suspend its $75 million capital campaign for a year.
It had raised $12 million but plans to turn its attention to annual fundraising efforts that will help it deal with immediate operating needs.
Another project on hold: plans to acquire land for a new building.
Also on the list: cutting expenses by decreasing travel spending and by asking employees to take on extra tasks instead of filling vacant jobs. A combination of attrition and outsourcing will help the group reduce overall headcount by 15 percent.
The federation will put the money it saves into an "economic relief fund" to help community members through the recession. It will ask its donors to contribute, too.
Seserman said he remains optimistic the federation can weather the downturn.
"It's not a 'sky-is-falling' scenario," he said.
Polk Majestic Travel Group
* Denver
* Travel agency
* 150 employees
Polk appears to have weathered the economic storm admirably so far. But the travel agency is feeling pressure as companies reassess whether to send employees to out-of-state conferences, business meetings and trade shows.
"Our business is holding steady, although we are trending down from last year," said Robert Polk, co-owner of the company. "We've seen our customers cutting back and laying off and telling us they have to watch every dollar they spend."
Polk Majestic hasn't had to take any drastic actions, but it is reining in promotional expenses and toning down the holiday party a bit this year. It also may send fewer people than normal to an event next month, although it likely won't decrease travel in general because it's vital for retaining and winning business.
"We're watching every expense right now and proceeding cautiously," Polk said. "We think that people will continue to travel, and we are trying to make sure we hang on to the business we have.
Denver International Airport
* Denver
* Airport
* 1,000 employees
DIA continues to fly high even as its two largest carriers eliminate service.
The airport has seen a steady uptick in passengers this year, while Southwest Airlines has added dozens of new flights.
But DIA officials say they are moving forward with caution as travel demand in general slows.
DIA also is boosting its operating budget for 2009 by up to 4 percent, but that's down from increases of about 6 percent in recent years.
And the airport is looking to lower costs wherever it can.
DIA already has put off several large expansion projects and is waiting to see how the economy and the airline industry shake out before moving forward. It also asked contractors in July to consider reducing their billing rates by 5 percent to help the airport keep costs down for airlines.
The airport is considering trimming travel expenses, cutting magazine subscriptions and "really looking at what is essential for 2009," DIA spokesman Jeff Green said.
Airport employees - as well as city workers - also won't receive the bonus personal time off near the holidays that they normally receive.
Visit Denver
* Denver
* Convention and visitors bureau
* 64 employees
The city's convention bureau gets its funding from the taxes visitors pay on local hotel rooms. So when tourism takes a hit, so does the agency's budget.
And that means leaner times are on the way.
CEO Richard Scharf expects a 5 percent decline in lodger's tax revenue but notes "it's not far-fetched to think it could go down by 15 percent" in 2009.
"We're hunkered down almost into post- 9/11 mentality," he said in reference to the falloff in visitors back in 2001.
Back then, the bureau did away with such details as real plants in the office. It's looking at banishing the service again even though it only has a few them.
"It does come to all the operations," he said. "How many times do you clean your windows? How many times do you shampoo your carpet? More than likely we will put a freeze on new hires."
On the upside, the bureau took care of big-ticket items last year such as rebuilding its Web site and a convention advertising campaign.
"I really believe we're as well-positioned as can be," Scharf said.
GBSM
* Denver
* Management consulting and strategic communications
* 16 employees
GBSM expects to scrutinize every line item in its expenses next year, but for now isn't making any wholesale cuts.
"Now is not the time to make an investment on the 70 percent certainty that it's going to be necessary," said Steven Silvers, a principal at the firm whose clients include Delta Dental, AARP and CH2M Hill. "It has to be 99.9 percent necessary."
That means not taking on any new employees and keeping in close contact with the firm's clients to make sure that "our priorities are aligned for 2009," Silvers said.
Most of GBSM's clients aren't making cuts to their 2009 budgets yet, either, he said, but everyone is in a cash-conserving mode - which means that new initiatives and technology purchases are being delayed for the time being.
EnCana Oil & Gas (USA)
* Denver
* Oil and natural gas producer
* 850 employees locally
EnCana won't have a holiday party this year. In past Decembers, 850 employees wined and dined at the Hyatt Regency Denver hotel.
Among Colorado's top natural gas producers, EnCana is feeling the pinch of plunging gas prices and is tightening its budget. The Calgary company, with U.S. headquarters in Denver, also has canceled its party in that Canadian city, which in past years had covered two nights.
"We made a decision this year we are not going to do that," said spokesman Doug Hock. "If individual departments want to have a holiday lunch, we have money budgeted for that but not for large parties."
EnCana expects employees to be good stewards when it comes to spending on corporate credit cards.
EnCana is still finalizing its budget for 2009, but, Hock said, "We'll be conservative in how we allocate our capital in Colorado, in particular, the Piceance Basin."
The basin, straddling Garfield and Rio Blanco counties, is a prolific natural gas field. Last year, EnCana spent $500 million to explore, drill and deliver natural gas from that field.
James Paton, Jeff Smith, Roger Fillion, John Rebchook, Joanne Kelley, Chris Walsh, Joyzelle Davis and Gargi Chakrabarty contributed to this story.
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November 23, 2008
6:39 p.m.
Suggest removal
FCZ writes:
Even as the economy slides into recession, many state and local governments continue to spend freely and expand their workforces.
State and local spending jumped 7.4% in the third quarter compared with a year earlier
Hiring more.
Borrowing more.
Collecting less.
http://www.usatoday.com/news/nation/2...