Orange hats and vests, red and yellow leaves, blue skies occasionally filled with gray clouds — the colors in Pagosa Country that announce it’s budget season.
Last Friday, the Pagosa Springs Town Council and other town officials met for a work session to begin the process of formulating a 2011 budget.
Detailing current economic conditions and the town’s accumulated reserves, Pagosa Springs Town Manager David Mitchem reported at the work session (and again at Tuesday’s council meeting) that the town has appeared to weather the recession rather well.
While the economy remains in a slump, both locally and nationally, that slump appears to have leveled out in Archuleta County. During the past two months, local sales tax revenue decreases have almost flattened out, indicating that the local economy has indeed begun a slight turnaround.
For two years, the town has approached expenditures with a flexible budget policy that responds to diminishing sales tax revenues. A 10-percent decrease in revenues in a given month, relative to the same period’s average revenues during the previous two years, mandates an additional 5-percent reduction in expenditures.
The 2010 town budget (approved in December 2009) was set at a 10-percent reduction from the previous year’s expenditures and projected revenues.
In May, the town went to an additional 5-percent budget reduction after sales tax revenues decreased nearly 10 percent for the year. Although revenues improved over the summer, showing less than a 5-percent decrease for July and August (relative to the previous two-year average during the same time period), council decided to retain the additional 5-percent reduction it had passed in May.
As of Tuesday, Mitchem reported that the town’s year-to-date sales tax revenues were down 5.01 percent from the same period last year — $114,114 for the year. However, with the 2010 budget formulated at 10 percent below 2009 expenditures and revenue, actual sales tax revenue is up 4.99 percent from budgeted revenues — up $113,683 for the year. Additionally, with May’s further budget reduction, total revenues are up 9.99 percent ($227,581), well ahead of what was budgeted at the end of last year.
According to Mitchem, 2010 year-end sales tax revenues for the town are projected to be $2,915,000 — $153,400 above revenue projections in the 2010 budget.
Given the financial report presented at last Friday’s work session, Mitchem felt confident approaching council on Tuesday night to request expenditures necessary for the town, including:
• $110,000 for three new police vehicles;
• $25,000 for a new parks vehicle;
• $11,000 to replace a failing server for the town’s computer network;
• $8,000 to replace four old computers being used by town staff.
Total expenditures in Mitchem’s request amounted to $154,000, but did not include additional expenditures requested by staff at the Ross Aragon Community Center (for gymnasium and meeting room upgrades).
“This will be coming out of revenues and not reserves, correct?” asked council member Shari Pierce.
“That’s correct,” Mitchem replied.
In fact, Mitchem had earlier reported that town reserves were in good shape, stating that the town currently has $1.4 million cash on hand — enough to operate the town for six months assuming no sales taxes revenues or 12 months assuming a 50-percent reduction in sales tax revenues.
That reserve total did not include the over $1 million received by the town last month from the Colorado Department of Revenue.
Also during Friday’s budget work session, Mitchem reported that projected sales tax revenues for 2011 are $2,853,374 slightly below 2009 actual revenues and just over 2 percent below projected 2010 total revenues.
Given the financial health of the town, the fact that expenditures would be taken from revenues and not reserves, as well as the sound condition of those reserves, council approved the expenditure request with a unanimous vote.
Although preliminary (town department heads are just beginning to develop next year’s budgets), the 2011 budget should take shape over the next two months, no doubt morphing as the 2010 economic situation becomes clearer. However, with better financial news for Pagosa Springs coming to light this past summer and a budget policy that has succeeded in keeping the town from drowning in debt, the 2011 budget could provide town staff a little more breathing room than it has been given during the previous two years.