County, feds ‘make up’

Although many have criticized the $700 billion federal financial bailout bill for being riddled with political pork, Archuleta County elected officials and financial staff are smelling the sweet aroma of bacon.

Ostensibly drafted and adopted Oct. 3 to shore up the country’s battered and beleaguered economy, the bill, known as H.R. 1424, or the Emergency Economic Stabilization Act of 2008, carries with it a number of sweeteners attached in order to garner maximum congressional support and ensure its passage.

Although a number of the riders border on the outrageous — the bill offers an excise tax exemption worth about $200,000 for manufacturers, producers, or importers of “certain wooden arrows designed for use by children” — one rider should provide counties such as Archuleta a much-needed economic boost.

Called the Secure Rural Schools and Community Self-determination Program, the rider will restore full funding to the Secure Rural Schools program and — most importantly to Archuleta County and other counties with vast tracts of federally owned land — the Payment in Lieu of Taxes (PILT) program.

According to U.S. Sen. Ken Salazar (D), one of the sponsors of the proposal, the PILT program provides compensation to local governments to make up for lost tax revenue due to the presence of non-taxable federal land within their jurisdictions. In recent years, Salazar said, the program has been consistently underfunded, and without the bailout bill’s passage, Colorado was poised to receive just $17.6 million for fiscal year 2008 — far short of the $28 million it would have received under a fully funded program.

But all that has changed.

With H.R. 1424’s successful passage, Washington guarantees full PILT funding through fiscal year 2012, including a “make-up” payment to Colorado counties for a shortfall in 2008. The make-up payments are due for disbursement in early 2009.

“With the economy hitting county budgets hard, the full funding of PILT and the Secure Rural Schools programs could not come at a better time,” said Salazar. “These funds will shore up budgets for schools in small towns, will allow counties to maintain their roads, and will fund other critical services for rural communities.”

According to documents provides by Salazar’s office, that means Archuleta County will receive about $325,121 as a “make up” payment for 2008, and $860,109 in PILT funding through 2012.

By contrast, Archuleta County received an initial PILT payment of $534,988 in 2008 and county financial records indicate PILT funding has averaged $531,839 between 2004 and 2007.

The promise of full PILT funding has Archuleta County Administrator Greg Schulte and Finance Director Don Warn particularly pleased.

“Full funding of PILT is very welcome news for Archuleta County. It actually gives the board of county commissioners additional flexibility in making decisions on how general fund money is spent. It enhances our choices; it relieves the pressure,” Schulte said.

Since April 2007, the county has faced financial pressures on a variety of fronts. With the threat of bankruptcy looming during the summer of 2007, the county laid off 38 employees between May and June and was forced to postpone and suspend a number of road projects and various county services. The county survived 2007 without going broke, and limped through 2008 with a tight budget but with its financial head above water. However, and despite various successes, Schulte and Warn discovered a $1 million revenue shortfall which once again put county finances in tenuous straits.

“That was $1 million in phantom revenue, “Schulte said.

Although staff and department heads succeeding in bridging the gap with a variety of general fund cuts and revenue adjustments, Schulte said full PILT funding will help mitigate the impact of the $1 million shortfall.

Although full PILT funding isn’t the silver bullet to solving the county’s economic woes, the infusion of funds will bolster county coffers and when used with other financial tools such as tighter internal controls, a contract and procurement and cash handling policy, timely state mandated audits, qualified financial staff, a new integrated financial software program and a zero-based budget approach, the county ledgers appear on the road to recovery.

Nevertheless, as the national, and now global, economic crisis continues its downward spiral, it remains unclear how local housing, building and development markets might be affected.

In 2009, the county could see a continued reduction in building permit and other development-related fee revenue, coupled with continued decreases in sales tax revenue, as travelers and locals are squeezed by the economic crunch. Schulte and Warn will shed light on 2009 county financials when they unveil a draft of the 2009 budget and present a third quarter financial update, Monday, Oct. 13th at 6:00 p.m. in the commissioners’ hearing room, at the courthouse.

While Archuleta County staff are drafting the 2009 budget and calculating the impact of the bailout boon, state level financial managers are also calculating revenues due to rural Colorado schools with the bill’s passage.

According to Salazar, in 2006 and 2007 43 Colorado counties received $6.4 million in payments. With approval of the bailout bill, Colorado should realize a 200 percent increase in funding, with $18.5 million anticipated for 2008, $16.7 million in 2009, $15 million in 2010, and $13.5 million in 2011.