Basalt library board’s gaffe taking its toll
BASALT – The Basalt Regional Library District is facing a $168,000 shortfall after failing in December to adjust a tax rate for repayment of bonds, the board of directors disclosed Monday night.
The prior library board didn’t increase the mill levy even though total valuation of property in the district plummeted 37 percent in 2011 because of the recession. As a result, its property tax revenues won’t cover the annual principal on bond repayment, officials said.
The board will consider later this summer if it wants to jack up the tax rate in 2013 to recover revenues. That would come at a time when many midvalley households are still struggling to recover from the recession.
The discovery comes on the heels of turmoil and turnover on the board. Four of seven members joined the board this year after the prior board came under fire from the public for inadequate oversight of finances. The bond repayment mill levy wasn’t part of the original controversy; it’s a new discovery.
Board treasurer Bernie Grauer, a new board member, said the mistake was discovered when the district’s new auditor worked with the finance committee on a budget for the bond repayment funds. Here’s how Grauer described the problem to the other board members: The district issued about $11 million in bonds to construct a new library in 2007. The annual principal payment on the bonds is $475,000. The district’s board of directors set a mill levy for the repayment of bonds at 1.82 mills for the 2008 budget. Typically, the mill levy is adjusted annually – up or down – to raise the proper revenues necessary to cover the bond repayment principal.
The board adjusted the mill levy for the 2009 budget. However, it kept the tax rate the same in 2009 when valuations soared by about 39 percent. The rate remained the same in 2010 when valuations remained high. In those years, the district collected more revenues than necessary to cover the bond repayment costs.
It’s unknown if the board’s actions were intentional or an oversight.
For the 2012 budget, the board kept the tax rate at 1.91 mills even though the values dropped $189.79, or 33 percent from the prior year. As a result, the district is $168,000 short of covering the $475,000 bond repayment cost.
The deficit for 2012 can be covered from reserves, Grauer said. The new board faces a tough decision later this year on whether it wants to keep dipping into reserves or nearly doubling the mill rate for bond repayment, Grauer said.
“PR-wise it’s not going to be fun,” he said of a possible tax hike.
Board president Judy Royer, who was on the board previously, said she didn’t know why the board didn’t adjust the mill levy for 2012. A mistake was made in December, she said. “2012 is done,” Royer said.
The district’s mill levy for general operating revenues is separate. Adjusting that mill levy requires voter approval. The mill levy for bond repayment can be adjusted by the board.
The mill levy gaffe couldn’t come at a worse time for the district. Operating revenues are down so sharply that the district must decide next month whether or not to approach voters for a tax increase.
The drop in property values means the district’s operating revenues fell from about $1.47 million in 2011 to $971,830 this year. The district is dipping into reserves for about $50,000 this year to balance its books. It has about $625,000 in operating reserves. “So, we do have enough to suck it up,” Grauer said.
But reduced property values will continue to plague special district governments, which depend heavily on property taxes. Values could be down another 10 to 30 percent for the next taxing cycle.
“That would put us in the same company as the popular 1990’s rock band, Dire Straits,” Grauer quipped.
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