Despite brief and amicable proceedings of the Pagosa Springs Town Council last Thursday, a dire report of the local economy was the stormy petrel perched prominently on the board’s agenda.
As reported in last week’s SUN, receipts from February’s sales tax revenues were down 25.46 percent from the same month last year. In his report to council, Town Manager David Mitchem qualified the figures by stating that several businesses had not submitted taxes in time for the report — not unusual, he said — but that, even with all businesses reporting, the decline would still be around 16.6 percent.
Mitchem added that, for the town to remain at current levels (a 10 percent decrease from the 2008 budget), March sales tax receipts would have to show a significant increase from the same month last year. “If March figures come in at five percent or above, we can stay at current levels,” said Mitchem, adding, “If those receipts are only at four percent, we’re looking at a fifteen percent reduction. If those receipts show a six percent reduction, we would have to cut to twenty percent.”
Regarding potential cuts in the budget, Mitchem warned council that a continued downward trend in sales tax receipts could result in a severe impact on town operations. “A twenty percent cut may very well lead to significant reductions in expenditures and that may even involve a reduction in staffing, which would mean a reduction in services.”
Mitchem clarified the situation further, “We just had a department head meeting and in that meeting we discussed that at 15 percent, there could be some furloughs.”
Following the meeting, SUN staff asked council member Mark Weiler if he felt vindicated regarding a budget proposal that he and council member Darrel Cotton had developed last October. In that proposal, Weiler and Cotton called for a 22 percent cut from the 2008 budget, with cuts affecting town programs and staffing alike.
“No one is happy about this,” Weiler said. “Unfortunately, I believe this is just the tip of the iceberg and things are going to get much worse before they get better.”
“I agree that things are going to continue to get worse,” agreed Cotton. “We haven’t see the bottom of this yet.”
Unfortunately, for some town staff, a continued downturn could spell disaster in a time when jobs are scarce — 9 percent unemployment for Archuleta County in March, 8.5 percent nationwide — with the situation predicted to continue to worsen. Should the town go to a 20 percent reduction in expenditures (and follow the recommendations made by Cotton and Weiler), nine positions would be cut, or moved to part-time status, of the 33 current full-time town staff.
Unless a miracle occurs, however, staff should prepare themselves for lean times. A Commerce Department report released yesterday showed the U.S. economy contracting at a steep 6.1 percent rate for the first quarter of 2009, far more than the 4.9 percent annual rate expected by economists. The drop in gross domestic product (GDP) follows a 6.3 percent decline from the fourth quarter of 2008 and has fallen three straight quarters — the first time since 1974-1975. The drop in GDP signals fewer jobs and more layoffs as consumer demand for goods and services continues to tighten nationwide.
However, Mitchem was adamant that, at this point, staffing was safe, saying, “Furloughs are only one of the options we’re considering. It was brought up as a suggestion — and just a suggestion — based on the state’s proposal to furlough employees for eight days out of the year.”
Looking ahead to March sales tax revenue figures, Mitchem said, “Any decisions we make depend on reduced revenues and that would dictate how we’d proceed. A 15 percent reduction may not require furloughs at all and our department heads may figure out other ways to trim their budgets.”
“But if it’s deeper,” Mitchem continued, “furloughs may be an option. We’re not looking at layoffs at this point but we are mandated by state law and the town charter to maintain a balanced budget, so nothing is off the table.”
March sales tax revenue figures will be available for the mid-month council meeting May 21 at noon. Town council meets again Monday, May 4 at 5 p.m. in council chambers at Town Hall.