Faced with a bleak financial future, Pitco to turn to voters
April 24, 2002
Pitkin County adjusted its financial outlook downward yesterday, in spite of reports that an economic recovery is under way.
The county commissioners agreed to adopt a more bleak outlook toward the future after a work session with Tom Oken, the county finance director.
The decision may mean further cutbacks in the county work force and more delays for several road resurfacing projects and other capital improvements. Declining revenues from sales taxes have so far resulted in a hiring freeze that’s left six positions unfilled.
The commissioners directed staff to begin working on two questions for next fall’s ballot that would allow the county to add about $1 million to its annual budget to maintain the status quo. One question would adjust the county’s method of calculating inflation to conform with state standards for a gain of nearly $200,000, and the other would allow it to retain approximately $800,000 in additional property taxes collected over the amount it is allowed to spend.
“If we can retain the excess property tax, then it looks like the general fund can be balanced, in the short and long run,” Oken said. “It doesn’t provide funding to do any more than we’re already doing, but it maintains service at current levels.”
During budgetary deliberations last fall, in the wake of Sept. 11, the commissioners agreed to adopt a relatively rosy outlook for budgetary purposes. The 2002 budget was based on estimates that sales tax revenue, which accounts for about a third of the county’s $17.5 million general fund, would decline by 5 percent.
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The county finance department had forecast a swift and marked recovery in 2003 and 2004, with sales tax collections growing 10 percent annually. It based that figure on the economic recovery following the recession of the early 1990s, when sales tax revenues grew at better than 10 percent a year.
At yesterday’s meeting, Oken said he thought the coming recovery would result in sales tax revenue increases of about 5 percent a year, instead of 10 percent.
“Nationally, the economic decline has not been as deep as we’ve experienced historically during recessions, so we’re seeing a more gradual recovery,” Oken said.
Without taking any action, the revised forecasts would force the county to cut another $622,000 from the general fund, either through lay offs, further delays in capital projects, or both. Those cuts would come on top of cuts that have already been made, such as the decision last fall to drastically reduce work on Brush Creek Road by eliminating improvements that would have made the road safer.
The county general fund represents all of the discretionary funding available to the county commissioners. It is used to pay for the sheriff and jail, the assessor and clerk and recorder, other administrative services including the treasurer and county attorney, housing and some of the road program.
County Manager Hilary Smith noted that cutbacks in staff so far – a 3 percent reduction in the employee base – have not come without pain. In addition to working harder, employees have seen reductions, and in some cases outright elimination, of raises and cost-of-living adjustments.
In the fall, the county estimated that sales tax revenues would decline by 5 percent.
Sales tax collections for January and February have actually come in 8 percent below the same period last year, but Oken isn’t worried. He expects to see the numbers for March to improve, in line with reports from the Aspen Skiing Co. and the lodging industry, and reckons there is a good chance last fall’s forecast will be right on the money.
More jobs will need to be eliminated if at least one of two things don’t happen. Either the economy has to drastically improve, or voters need to authorize the county to use the excess property taxes.
The county has excess property taxes because the commissioners decided last fall to adopt a practice that is used by the city of Aspen and local school districts to beef up their budgets. Instead of reducing the annual levy by the full amount that would keep collection in line with limits set by the state constitution’s Taxpayer Bill of Rights (TABOR), the county only reduced it partially, thus creating a surplus of property taxes. It must now ask voters for permission to keep the excess; if they say no, the money will be refunded.
“The voters, of course, will have to understand that they can pay less for government, but that means they are going to have less government,” County Commissioner Mick Ireland said at the end of the work session.