Fine-tuning the finances

Financial fine-tuning continues in the courthouse, with the Archuleta County Board of County Commissioners (BoCC) unanimously approving a reserve savings policy Tuesday.

“By committing to this reserve policy, this becomes a budgeted item. In effect, we’re paying ourselves first,” said Archuleta County Administrator Greg Schulte.

According to the policy, the intent is to have $1.2 million (or 10 to 15 percent of General Fund expenditures) banked by the end of 2012.

Although Schulte acknowledged the savings strategy was aggressive, he said it would not prove onerous to the county budgets.

“I believe this is doable. It is aggressive enough to make us set aside the money,” Schulte said.

In order to accomplish the $1.2 million goal, the policy calls for a tiered savings approach, with $300,000 set aside each year between 2009 and 2012.

“The biggest factor that tells me we can do this is how we’re ending ’08,” Archuleta County Finance Director Don Warn said.

At the end of 2008, Warn said the county realized a $400,000 surplus, and that projections for the end of 2009 indicate a potential surplus of $255,000.

Warn said careful watch of expenditures will ensure the county can bank the requisite reserves — per the policy — at year’s end.

One of the factors that may help make banking reserves possible is full PILT (Payment in Lieu of Taxes) funding as part of the Bush administration’s emergency economic stabilization act signed into law in October.

According to the legislation, the county stands to receive an additional $300,000 per year between 2009 and 2012.

However, while full PILT funding may provide a much-needed financial buffer, some in the organization predict tougher times ahead with declining property values and thus, the potential for less property tax revenue collected in 2011 and 2012.

But Warn said county financial staff will be well aware of the revenue decreases before they occur, giving them plenty of time to prepare and make budget adjustments.

“That’s the beauty of government finances,” Warn said. “Everything is in arrears. It gives us time to look at the local economy and plan ahead.”

But while Schulte and the commissioners advocated the “paying ourselves first” reserve savings strategy, two citizens questioned whether the community wouldn’t be better served if the money was used to return programs or services — such as Mountain Express — to pre, 2007 financial meltdown levels.

Commissioner John Ranson acknowledged the importance of balancing a reserve strategy with maintaining program and service levels, although at this point in the county’s financial history, he said banking reserves trumped attempts to return certain programs or services to their pre-crisis levels.

Schulte said the reserve policy was based on the current level of county services and added that any proposed expansions could be explored — dollars permitting — during subsequent budget cycles.

According to the policy, a commissioner resolution will be required to spend dollars from the designated reserve account. Furthermore, Warn said, the policy mandates that any expenditure must be repaid by the end of the year.

Warn explained the policy should eliminate the perennial problem of having to obtain a line of credit to cover cash flow shortages at the beginning of each year.

In years past, cash flow shortages have been common in January when the county has not yet received it’s first infusion of property tax payments yet faces a number of big ticket expenditures such as membership dues, contributions and payment of insurance policy premiums.

In addition to approving the reserve savings policy, the board also approved giving preferential considerations to local vendors or contractors for non-capital purchases if bids are within 10 percent and if all other considerations such as product quality and service, are equal.

“If they (local vendors) can provide the same product and service, then we should do business with local vendors. It’s good for the community,” Warn said.

The decision to give preference to local vendors was formally incorporated into the county’s existing procurement policy.

In other financial matters, the board approved extending the tenure of the Citizen’s Financial Advisory Task Force for an additional year. Although the decision did not include a discussion of whom or how many will serve, that conversation will likely occur in the coming weeks.