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Council adopts 2012 budget policy

Tis’ the season — for adopting the following year’s budgets and certifying mill levies.

Thus, the Pagosa Springs Town Council made quick work of financial matters on Tuesday night, approving budgets and current mill levies for the town, as well as the Pagosa Springs Sanitation and General Improvement District (council also serves as the district’s board).

Council also approved a resolution that adopts a new budget policy for next year. However, “new” is relative, as the policy is essentially (with the exception of a few minor tweaks) the same policy the town has been using since 2009.

In November 2008, council approved a flexible budget policy responding to diminishing sales tax receipts (which account for more than 70 percent of the town’s revenue stream) over a two-month period, relative to collections during the previous two years during the same period, with incremental cuts to the budget. For instance, two months of receipt decreases of 5 percent mandates a 10-percent decrease in expenditures.

For 2012, policy is changed such that a 5-percent decrease of, “the average revenues collected for the same period in the preceding two fiscal years,” calls for a 7-percent reduction in expenditures (with a 10-percent drop calling for a 12-percent reduction and a decrease of 15 percent calling for a 17-percent reduction).

Explaining next year’s budget policy at Tuesday night’s meeting, Pagosa Springs Town Manager David Mitchem said, “The essence is this: the local economy is still very fragile.”

When asked by SUN staff if the new budget policy would continue with expenditures down 10 percent from 2008 levels, Mitchem responded that the new policy reflected 2010 spending levels.

“But wasn’t the 2010 budget policy a 10-percent reduction from 2008 levels?” SUN staff asked.

Mitchem conceded that point.

In fact, although 2012 expenditures remain at a 10-percent reduction from 2008 budgeted expenditures, current economic conditions in the area should have mandated a return to 2008 spending levels.

As reported in the Nov. 17 edition of The SUN, sales tax revenues for the town (and county) are up slightly, not just from last year, but also from average receipts from 2009 and 2010. Even after subtracting out additional revenues collected from late audits, year-to-date sales tax collections are still up 1.5 percent from last year and up .07 percent from year-to-date collections averaged over the past two years.

However, the budget policy presented Tuesday only addresses expenditure reductions; no part of the policy stipulates when expenditures are returned to previous spending levels.

As stated earlier, the 2012 budget policy calls for a 7-percent reduction in expenditures when sales tax revenue collections fall 5 percent below the average of collections from the previous two fiscal years. Nonetheless, the town’s expenditures remain 10 percent below 2008 levels, even though this year’s sales tax collections remain slightly above the average for 2009 and 2010 collections.

So, with the town spending less and saving more, what is it doing with that surplus?

Mitchem answered that question succinctly on Tuesday night: building reserves.

As also reported last month in The SUN, over the last two years, the town has accumulated reserves that exceed its goal to be able to operate for six months in the highly unlikely scenario that it would see zero collections for half a year.

Mitchem explained to council that those additional reserves are being held in order to fund cash matches for any potential grants the town might pursue.

“We have that money to leverage grants and loans we might decide to go after,” Mitchem said at the meeting.

The potential for several projects has been raised at previous council meetings, all candidates for state or federal grant programs. Those projects include completion of the town’s Riverwalk trail system (including a pedestrian bridge installed at the Sixth Street river bend), improvements to Reservoir Hill and additional whitewater features installed in the portion of the San Juan river that runs through town — among others.

The 2012 budget policy included a section reauthorizing a 50-percent abatement of the town’s building/development and building permit fees.

Local businessman Morgan Murri asked council if that abatement would be waived for projects exceeding 25,000 square feet.

Council could not answer Murri’s question. Instead, trustee Stan Holt asked that council table the question raised by Murri for further discussion at council’s mid-month meeting.

With a consensus of trustees, council agreed to revisit the fee abatement policy later this month.

At that point, local businessman Mark Weiler asked if council would be delaying a decision on its budget (and budget policy) in violation of statutory requirements.

Mitchem responded that council would vote to accept the budget and policy.

“We can amend the budget any time after its acceptance,” Mitchem explained.

Indeed, smart money would go towards a bet that council will amend its budget at least once over the next year.

Council meets again at Town Hall at noon on Dec. 15, to consider an Intergovernmental Agreement between the town and the Pagosa Area Water and Sanitation District, regarding a proposal that would have PAWSD treat the town’s sewage.

The town’s regularly scheduled mid-month meeting will take place at noon, Dec. 22, in council chambers.

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