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Town to hold to 15-percent budget reduction

Facing an uncertain economic climate (see Page 1 article), the Pagosa Springs Town Council voted to hold the town’s budget at a 15-percent reduction from 2008 budgeted expenditures.

Hearing a presentation on July sales tax revenues from Pagosa Springs Town Manager David Mitchem during last Thursday’s mid-month council meeting, the trustees were almost unanimously opposed to Mitchem’s recommendation to return to a 10-percent reduction — the place where the town began in January with its 2010 budget.

“Based on current analysis and the formula of your policy, and prospects for revenues projected over the next three months, it is my recommendation that we return to a ten-percent reduction in expenditures,” Mitchem said.

Trustee Jerry Jackson immediately voiced doubts regarding the revised reduction, saying, “I just want to go on record that I have some concerns about the future of the economy. I believe it’s going to get worse before it gets better.”

Agreeing with Jackson, trustee Shari Pierce added, “I just would feel more comfortable if we stayed where we are for the time being,” citing her belief that the local economy takes an inevitable downturn during the fall and winter months.

The record from the past six years does not substantiate Pierce’s claim, however. While the months of September through November indeed show a drop in sales tax revenues from July and August (the sales tax revenue report for Aug. 2010 is due Oct. 12), December has shown the highest sales tax revenues in three of the past six years and had the second highest sales tax revenues during the remaining three years. In fact, over the past six years, December 2006 holds the record for the highest sales tax collections.

Indeed, months of concern for Archuleta County are January through April, showing the lowest sales tax revenues. Over the past six years, the final quarter of the year trails only the third quarter in sales tax collections.

Nonetheless, the board appeared convinced of Pierce’s conventional wisdom. Trustee Don Volger asked Mitchem about the benefit of returning to a 10-percent reduction in the budget to which Mitchem responded, “There are a number of immediate expenditures the town requires,” citing the need to replace road equipment, a failing server on the town’s computer network and several other items that could not otherwise be purchased with a 15-percent reduction of the budget.

As reported on the front page of last week’s edition of The SUN, the town realized an unanticipated windfall of over $1 million due to an audit and subsequent collection of back taxes by the Colorado Department of Revenue. Bringing that news to council at Thursday’s meeting (prior to the budget discussion) led Jackson to suggest using part of that revenue windfall to meet the expenditures Mitchem had described.

Trustee Darrell Cotton objected, however. “If 60, 61, and 101 pass, that ($1 million plus) would be a nice little nest egg. It makes me nervous that we’re already talking about spending it.”

“60, 61 and 101” are November ballot initiatives facing Colorado voters this fall. Amendment 60 and Proposition 101 could dramatically cut state funding for the town while Amendment 61 could severely limit the town’s ability to borrow for capital improvement projects.

“We’re not talking about spending it yet,” Pierce said.

Nevertheless, council remained with a conservative approach to the budget.

“I move we maintain our current budget,” Jackson said. With a second by Pierce (and only Volger opposing), council passed the resolution, deferring action on needed expenditures.

Either unaware of the budget policy it had accepted in 2008 (and revised in 2009) or diffident in the face of current and present economic conditions, council continued the 15-percent reduction. That policy, adopted to respond to fluctuations in the town’s sales tax revenue stream, directs town staff to automatically reduce expenditures when revenues reached a stipulated threshold. Thus, a 10-percent reduction in revenues mandates, by policy, an automatic 15-percent reduction in expenditures (a move council made this past May).

However, the town has never initiated an automatic reduction in expenditures: every month since December 2008, council has voted on all budget reductions following a drop in sales tax revenues.

Furthermore, while policy states that a reversal in budget reduction does require approval by council, ignoring the revenue reduction thresholds it set out in 2008.

July sales tax revenues were down 2.91 percent relative to the same month last year and down just 4.3 percent from average collections for July 2008 and 2009; year-to-date, collections are down 4.43 percent.

Application of both the 2008 budget policy and its January 2010 revision (establishing an automatic 10-percent reduction from 2008 expenditures, harsher than the 5-percent reduction set forth in previous policy) would not suggest a 15-percent reduction in expenditures but rather a 5-percent reduction since July 2010 failed to achieve the 5-percent revenue reduction threshold enumerated in the policy.

In fact, sales tax revenue collections for June and July 2010 show a 4.66 average decline relative to those same months for 2008 and 2009.

The willingness of the council to ignore its budget policy may have been due in part to an earlier discussion on the aforementioned ballot initiatives — Amendments 60, 61 and Proposition 101.

During a previous joint meeting with the Archuleta County Board of County Commissioners, council members and commissioners unanimously expressed opposition to the initiatives. Likewise, Archuleta School District 50 Joint Superintendent Mark DeVoti and Ruby Sisson Library Director Jackie Welch both spoke out in opposition of the initiatives.

Welch stated that Proposition 101 would take away more than $75,000 from the library during the next four years while Amendment 60 would mean a loss of over $300,000 in library funding if passed.

“It’s going to be very significant, we are so well used by the community,” Welch said. “It will have an impact.”

DeVoti added, “If these pass and we cut out transportation, all sports and went to a four-day school week, we still wouldn’t be close to making up for lost funding, not even halfway there.”

“Considering the impact on the county, the town and the school district, it appears ill-conceived to me,” said Mitchem.

Later, during the mid-month meeting, council made clear its opposition to the initiatives. Presenting a resolution stating opposition to the initiatives, Mitchem said, “After we get into it a little deeper, the impact on the town is very significant.”

Using debt remaining on the Ross Aragon Community Center as an example of impacts of Amendment 60, Mitchem said, “Once that debt is paid off, the town would have to rebate to the citizens a large part of the amount of that debt ... that’s more than we take in on property tax; we’d even have to rebate some of the sales tax.”

“These amendments exist because the citizens are fed up with bloated government,” said Cotton, but adding, “These go way beyond what we can handle. I can’t support these because they go too far and we would never recover from them.”

Speaking previously at the joint town/county meeting, Cotton had said that, while he was convinced of the need to trim back government spending and the size of bureaucracy, he was satisfied that the town and county were acting as responsible stewards of tax payer money.

With a motion to approve the resolution opposing the initiatives made by trustee Stan Holt, and a second by Jackson, council approved the resolution with a unanimous vote.

While statutorily prevented from actively campaigning against the initiatives, council is allowed by law to present a statement of opposition or support for measures on state or federal ballots. Given the potential impacts of the measures throughout the community and the estimated funding shortfalls faced by the town, council clearly acted in its own self-interest — and the interested of citizens served by the town — in stating opposition to Amendments 60, 61 and Proposition 101. It may have been those same interests that has led council, on numerous occasions to ignore its own budget policy.