The chronology below outlines a chain of events leading up to, and during, the county’s ongoing financial crisis. Although extensive, we acknowledge the chronology is far from complete, and as events unfold or new information is discovered, we will provide updates.
For a week-by-week listing of the most recent events, consult forthcoming issues of The SUN.
To review the chronology in its entirety, visit pagosasun.com. Click the “county” link on the left side of the page.

Spring/early summer 2004

Staff turnover in Archuleta County Finance Department
• Bob Burchett replaces Cathy Wilson as the Archuleta County Finance Director.

Data destroyed, documents shredded
• Per Archuleta County Commissioner Ronnie Zaday, during finance department staff turnover, key financial records and data on a hard drive(s) are lost or destroyed. (See chronology entry for June 21, 2007)
• Burchett, per Zaday, says loss of documents and data prior to his hiring precipitated delays in completing the 2003 annual audit.

July 31, 2004

2003 audit deadline missed
• The county misses the July 31, 2004, submittal deadline for the annual, state-mandated audit. A 60-day grace period passes, and the state freezes Archuleta County’s property taxes. The freeze goes into effect Dec. 20, 2004, and is removed Feb. 9, 2005. The release is granted after the audit is submitted and accepted by the state.

July 31, 2005

2004 audit deadline missed
• The county misses the July 31, 2005, submittal deadline for the annual, state-mandated audit. A 60-day grace period passes, and the state freezes Archuleta County’s property taxes. The freeze goes into effect Nov. 12, 2005, and is removed Feb. 23, 2006, after the audit is submitted and accepted by the state.

July 31, 2006

2005 audit deadline missed
• The county misses the July 31, 2006, submittal deadline for the annual, state-mandated audit. A 60-day grace period passes, and the state freezes Archuleta County’s property taxes. The freeze goes into effect, Nov. 6, 2006, and is removed April 20, 2007, after the audit is completed and accepted by the state.
No public mention is made of the errant audit or the frozen property taxes.

2006

County lives on draw
• According to Archuleta County Administrator Bob Campbell, the county lives on a $1.2 million draw against its budget.

Fall 2006

Courthouse for sale
• County issues requests for proposals for parties interested in purchasing the Archuleta County Courthouse.
Dave Brown’s, Pagosa Holdings LLC, is the sole respondent.

Dec. 21, 2006

Balanced budget
• In an interview with SUN staff, former Archuleta County Finance Director Bob Burchett says the 2007 budget is a “balanced budget.”

Winter 2006-2007

First Baker memo
• Archuleta County Treasurer Lois Baker sends memo to the Board of County Commissioners warning them of the “impending financial catastrophe.”
(On June 25, 2007, SUN staff interviewed Baker, and although the treasurer did not retain a copy of the document, nor could she remember the date the memo was sent, she asserted she sent a memo to the BoCC warning of the county’s financial troubles. She said the former treasurer, Traves Garrett, had offered similar warnings. Baker said she might have sent the memo in December 2006, but is not positive.)

January 2007

County disregards property tax freeze
• Baker takes office and says she learns, soon thereafter, that the state had imposed a property tax freeze effective Nov. 6, 2006, due to the county’s failure to submit the 2005 audit — a mandate her former boss, Garrett, had not followed. Baker says she assumed the BoCC already knew about the freeze, and when she approached Burchett about the issue, she alleges he told her not to worry about it, that the audit would be in soon, and the freeze would be lifted.

January 2007

County overspends
• County documents indicate overspending by $243,494.

January 9, 2007

Brown makes bid
• County accepts Brown’s courthouse purchase offer and the parties enter into negotiations.

February 2007

County overspends
• County documents indicate overspending by $112,124.

March 2007

County overspends
• County documents indicate overspending by $706,845.

Late March 2007

Cash flow problems
• According to Burchett, he runs month-end reports and discovers cash flow problems.
‘Hiccup’
• Adjectives used during early assessments of the situation describe the problem as a cash flow “hiccup,” or “speed bump.”

Early April 2007

Baker to enact freeze
• Baker tells commissioners she must impose the state-mandated property tax freeze.

April 4, 2007

Baker memo
• Archuleta County Treasurer Lois Baker issues memo to Archuleta County Administrator Bob Campbell and the Board of County Commissioners (BoCC), stating the county is experiencing cash flow troubles and, thus, is short on funds.

April 6, 2007

CDs cashed
• Baker withdrawals the county’s last $1.2 million held in certificates of deposit to pay special districts.

Denial
• Burchett maintains that everything is fine.

April 10, 2007

‘Dwindled down to nothing’
• During a strategic planning session, Baker states the county is short by $200,000; Burchett describes fluid reserves as having “dwindled down to nothing.”

Costs outpace revenues
• Burchett attributes the shortfall to decreases in sales tax revenues, rising fuel costs, costly first-quarter expenditures and spending down of reserves.

Questions of legality
• During the meeting, Baker describes some of the county’s financial practices as “illegal.” Later, when asked for clarification, Baker explains, “What I thought was illegal about it was that I didn’t have any control over the funds. When payroll would come in, they (finance) wrote checks without me knowing how much they were writing them for. The same went for accounts receivable.”
Baker says Colorado Revised Statute 30-10-711 supports her assertions, while Burchett calls the issue “a matter of interpretation regarding statute.”

Remedial action
• Campbell imposes the first in what will become a series of cuts, described as “remedial action.” The cuts include: a hiring freeze, suspension of travel and training, a freeze on capital purchases.

April 6, 2007 – April 16, 2007

Denial
• Key county staff maintain that all is well, and Burchett explains the problem is largely due to anticipated income not reaching accounts on time. Burchett says with first-quarter expenditures totalling $661,000, coupled with a $90,000 shortfall in property tax collections (as compared to 2006), and first-quarter gross receipts income down 13 percent from projections, the cash flow problem totals nearly $1 million.

‘Good wake up call’
• Campbell says the situation of incurring high first-quarter expenses appears to be business as usual for Archuleta County, although he says it is a situation he does not want to repeat in the future.

Revenue projections
• Campbell says forthcoming property tax revenues, stronger gross receipts collections in April, receipt of Highway Users Tax Funds, and a typically strong revenue stream between April and June, should get the county back on its financial feet.

April 17, 2007

BoCC ratifies ‘remedial actions’
• During a regular BoCC meeting, the board ratifies Campbell’s cost saving measures proposed April 10, with the measures remaining in effect until June 30.

$500,000 line of credit
• The board also approves seeking a $500,000, annually renewable line of credit from the Bank of the San Juans. Burchett plays down the importance of the move.
“We may need to use it, we may not. This is strictly an operating line of credit based on revenues coming into the county. Our intent is to have this in place for cash flow pick-ups,” Burchett says.
(By the end of May, the county will have exhausted the line of credit, and the Bank of the San Juans declines the county’s request to extend the loan. Tensions between the two entities become strained over a variety of issues: one issue concerns whether county finance department staff supplied knowingly false or misleading information on the loan application.)

April 24, 2007

From bad to worse
• During the BoCC’s agenda review work session, Burchett and Campbell announce a full department head briefing for May 8 concerning the county’s financial status and Burchett acknowledges that the situation may be worse than anticipated.
“Fourth quarter projections look really bad,” says Burchett.
And Campbell adds, “Things aren’t real optimistic, money isn’t coming in as expected. We knew it was a tight year, but it hit us harder than we’d expected.”

2005 audit submitted
• Burchett announces that he submitted the county’s errant 2005 audit to the state April 20, and that the state released its freeze on Archuleta County’s use of its property tax revenue. Although SUN staff cannot confirm Burchett’s statements by press time, a subsequent conversation with the state auditor’s office indicates the state has frozen Archuleta County’s use of property tax during three consecutive years — 2003, 2004 and 2005 — for audits submitted well past the state mandated deadline. A state official says, aside from late audits, the county has problems reconciling cash, and managing certain internal service funds. SUN staff will later learn the problems persist from 2003 through 2005, and may provide clues to unraveling the county’s burgeoning financial crisis.
Burchett counters assertions of illegality
• Burchett says he is confident in the county’s compliance with budgetary statutes and its adherence to sound accounting principles.
“Our budget, as far as I know, is in full compliance with what the state requires,” Burchett says.

May 2, 2007

‘Hiccup’ turns into $2.4 million shortfall
• Campbell announces the county faces a $2.4 million shortfall for 2007 and cannot make payroll June 1. Campbell estimates the shortfall equals about $300,000 per month until the end of the year.

20 percent across the board cuts
• Campbell asks department heads to make 20-percent cuts and intensifies cost-saving measures. He asks staff to forfeit county cell phones, suspends internal service contracts, and lays the groundwork for future cuts to the solid waste and transportation departments.

20-percent staff reductions
• Campbell also proposes a 20-percent staff reduction, and reducing remaining staff’s hours from 40 hours per week to 30 or 32.

Campbell alludes to source of problem
• Campbell suggests the problem could be linked to financial mismanagement going back to 2003, and the 2003 audit’s management comment letter provides some clarification.
According to the document, the county’s finance department had not reconciled many county accounts prior to commencement of the audit. For the 2003 audit, the county missed the submittal deadline, and the state imposed a property tax freeze beginning Dec. 20, 2004, and lasting until Feb. 9, 2005.
In a carryover from 2003, the 2004 audit shows similar problems, and the management comment letter indicates the county has not been reconciling general ledger accounts on a timely, or monthly basis. The document also states the airport is depending heavily on transfers from other county funds, and the county is heavily subsidizing airport operations. The airport fund is administered as an enterprise fund, and as such, it should be a self-sustaining entity.
For the 2004 audit, the county again missed the submittal deadline, and the state froze Archuleta County property taxes from Nov. 12, 2005, until Feb. 23, 2006.
In 2005, the county misses the audit submittal deadline again, followed by a property tax freeze imposed Nov. 6, 2006. The freeze remains in effect until April 20, 2007.
When asked about the impact of a property tax freeze, Burchett plays it down and says, “It’s not such a big deal by the implementation date.”

Line of credit almost exhausted
• Burchett announces the county has used $425,000 of the $500,000 line of credit.

May 8, 2007

Crisis
• Campbell and BoCC approve the first major round of cuts, including 22 forced layoffs and other cuts totaling $1.6 million. The assessor’s office is hit hardest with seven positions eliminated.
Archuleta County Commissioners Bob Moomaw and Zaday approve the layoffs and other cuts. Archuleta County Commissioner Robin Schiro is vacationing in Alaska, and thus, is not present to vote.
Campbell says the cuts should balance the budget.

2005 audit presentation
• Accountants Karla Willschau and Kristi Lopez of the certified public accounting firm, Wall, Smith, Bateman & Associates Inc. present the 2005 audit to the BoCC. Willschau says the county has failed to maintain key financial records which reconcile differences in cash and investment balances between the treasurer’s office and the general ledger since the end of 2004. In addition, Willschau says the county has failed to resolve six-figure deficits in some internal service funds. Willschau also reports there is $648,000 in unaccounted-for cash in 2005.

No opinion
• Due to lack of documentation, regular reconciliations, and inadequate internal controls, Willschau cannot express an opinion on the county’s 2005 audit.
Willschau cautions the BoCC that fund balances represented in the audit can’t be trusted, and that for budgeting purposes, the county planned to spend $1 million more than it actually had in 2005.

May 14, 2007

‘Not real money’
• Moomaw and Zaday meet with Burchett, County Attorney Theresa Williams, Campbell and treasurer’s staff for an assessment of existing fund balances. Schiro is absent. She calls into the meeting, stating she is having an emergency but would like to attend by telephone.
• During the meeting, Burchett describes the $2.87 million in the Road Capital Improvement Fund as “not real money.”
And Kelly Carson Evans from the treasurer’s office explains, “We’ve got so many funds so far in the hole, that cash doesn’t exist.”

Funds vaporized
• County documents dated May 11 and presented at the briefing, also indicate major deficits in other county funds. For example, the airport fund is negative $1.56 million, fleet $1.24 million, $574,457 in human services, $60,296 in transportation, and $96,441 in the senior services fund.
Campbell reiterates Willschau’s assertion that the county’s real financial troubles probably began in 2003 and 2004.

Forensic audit
• Campbell announces intent to commission a forensic audit. The audit will attempt to balance the books while searching for fraud, embezzlement or other illegal activities. The audit will be paid for with a $150,000 Department of Local Affairs (DoLA) grant.

No clear picture
• Cash on hand is estimated at $675,534, although Campbell admits, “We have no clear picture of our financial condition and we have a carryover of issues and errors that we’ve allowed to fester.”

County campus project remains a priority
• Campbell maintains county commitment to pursuing the new county facilities project, and negotiations with Brown over the courthouse sale continue.

Two years to recovery
• Campbell and Moomaw say two years to recover from financial situation.

May 16, 2007

Burchett gone
• Campbell reports that Burchett “no longer works for Archuleta County.” When asked if Burchett quit or was fired, Campbell declines comment. (A subsequent comment made by Moomaw in a June 19 BoCC meeting indicates Burchett was terminated.)

Situation ‘bleak’ and ‘desperate’
• As of May 16, county documents indicate $134,266 in the general fund bank account. The $2.87 million that should be in the Road Capital Improvement Fund is gone — the money was used for other purposes, including general operations and payroll.

$3 million in CDs cashed
• The county’s remaining $3 million in reserves held in certificates of deposit have been cashed and the county has no savings aside from a state-mandated emergency reserve fund of $492,000.
However, reports from county staff conflict. For example, during a May 14 finance briefing, $492,540 in a restricted emergency reserve fund was described as “not real money,” while a balance sheet from the treasure’s office shows a state-mandated emergency reserve fund at just $63,357. It is unclear where, and if, the $492,000 in reserves exists.

May 21, 2007

State begins human services audit
• The Colorado State Department of Human Services begins audit of the county’s human services department. The effort is separate from a forthcoming forensic audit.

May 22, 2007

Fund balances mercurial
• A county-generated fund balance sheet shows $2.18 million in available, unrestricted cash, however, Baker’s figures indicate true cash at $500,000.

Solid waste fund gone
• County staff also learn that $456,727 in the solid waste operating fund “is not there,” and coupled with the $2.87 million missing from the Road and Bridge Capital Improvement Fund, the shortfall reaches $3.31 million.

May 24, 2007

Figures ephemeral, situation fluid
• SUN staff analyzes county financial documents dated May 18, 2007. The documents indicate a monthly shortfall of $380,027, and a year-end shortfall of $2.66 million. However, missing dollars from road capital improvement and solid waste put the total at $3.31 million, the discrepancy demonstrates the fluidity of the county’s financial situation.

May 29, 2007

CDOT restructures loan
• The Colorado Department of Transportation’s (CDOT) Aeronautical Division honors the county’s request to restructure the loan on the airport fixed-base operator (FBO) building into an interest-only payment for 2007. The approval brings the county’s payment down to $82,000 and will save the county $226,000 in 2007.

Line of credit repaid
• County announces repayment of $435,366 of the $500,000 line of credit borrowed from the Bank of the San Juans. Although the move is touted in a press release as the county honoring its fiduciary duty to Archuleta County taxpayers, it is later learned the loan is a forced repayment, and tensions between the two entities mount over allegations that county finance department staff provided knowingly false or misleading information on the loan application.

May 31, 2007
County announces grants/minor successes
• $148,000 saved by deferring the county’s matching portion of a DoLA-funded Arboles construction project; $50,000 from DoLA to hire a consultant to help reorganize the finance department and finance department operations — retired La Plata County Finance Director Wayne Bedor is slated for the post; $130,000 from DoLA to fund the county’s matching portion of the airport’s parallel taxiway project; $180,000 discovered during the human services audit, $144,000 of which the county may ultimately be able to collect; $300,000 in certificates of deposit discovered; Campbell says county can make June 1 payroll.

Questionable fund transfers
• Speaking to members of the Pagosa Springs Rotary Club, Campbell references an agreement between former finance director and former treasurer (presumably Bob Burchett and Traves Garrett respectively) that enabled the movement of monies between funds without BoCC approval.

June 1, 2007

Assessor files lawsuit
• Archuleta County Assessor Keren Prior sues the Board of County Commissioners over staffing cuts made May 8, and the board is served with papers from Prior’s attorney Michael McLachlan.

June 4, 2007

Assessor and BoCC in court
• Prior testifies her department was unfairly cut, and seeks full reinstatement of her staff. During the proceedings, when McLachlan and Judge Jim Denvir learn the BoCC will hold a public hearing June 5, where Prior can appeal the BoCC’s May 8 decision, McLachlan withdraws the suit. Denvir chastises Prior for not offering constructive, cost-saving solutions during the county’s financial crisis.

June 5, 2007

Prior appeals to BoCC
• Prior makes her staffing case before the board. Although the commissioners maintain their decision and none of Prior’s staff are reinstated, Prior and Campbell tentatively agree to meet June 6 to discuss reinstating one, possibly two positions.

Ratification
• The board ratifies cuts made May 8.
Bare bones mag-chloride
• County announces a bare-bones magnesium chloride program for the remainder of 2007.

June 7, 2007

County holds first ‘town hall’ meeting
• Campbell announces that, as of June 7, the county still faces a monthly shortfall of about $380,000 that will persist through year’s end.

$750,000 missing
• Campbell says $750,000 remains unaccounted for in 2004, $112,000 of which is cash.

More layoffs imminent
• Campbell says more staff cuts are imminent.
Default on the radar
• During the meeting, the first murmurings of default are heard. “If the county doesn’t do it, (balance the budget) the state will,” Campbell says.

Missing documents and data
• Zaday makes first public reference to lost or destroyed financial documents during finance department staff turnover in 2004. (See June 21, 2007 entry).

June 13, 2007

Deeper cuts pending
• Campbell announces his intent to make further cuts on June 19. On the table are another 21 employee layoffs and cuts in numerous departments, including: transportation, road and bridge, sheriff’s department, dispatch and building and planning.

Revenues short $2 million
• Campbell estimates revenues shortfalls hover at around $2 million.

June 19, 2007

Regular BoCC meeting
• The board postpones the second round of budget cuts announced June 13. Campbell says budget documents were not prepared in time for board review and approval and the hearing is rescheduled for June 26.

Courthouse deal crashes
• The board refuses Dave Brown’s $1.4 million purchase offer for the Archuleta County Courthouse. Proponents of the deal say the sale will revitalize the county coffers, however, the board says selling the courthouse would not be prudent in light of the county’s tenuous financial situation.

Fiscal oversight taskforce appointed
• Campbell recommends an eight-member team of private citizens to help guide the county through the forensic audit and the financial recovery process. The team includes: Larry Allen, Alvin Bledsoe, J.R. Ford, Marion Francis, Richard Lindblad, Les Mundall, Bob Nordmann and John Ranson.

June 20, 2007

Program and service cuts listed
• County staff provides a list of departments and services affected by the pending second round of budget cuts. Twenty-one potential layoffs are reduced to 17, and cuts to departments programs and services are explicitly listed. (See “County cuts” in the June 21, 2007 edition of the SUN.)

June 21, 2007

County holds second ‘town hall’ meeting
• Campbell announces county has made up about $800,000 of $2.6 million total shortfall.
Campbell says sale of Hot Springs Boulevard property, more layoffs, program and project cuts and an equipment auction should get county close to a balanced budget.
“We can certainly see the light at the end of the tunnel,” Campbell says.

Forensic audit to commence
• Campbell said forensic audit team is poised to begin the following week.

Bedor declines
• Campbell announces that retired La Plata County Finance Director Bedor has declined to participate as a consultant in the county’s financial recovery. Campbell says he will work with DoLA to find another consultant.

Payroll pressures
• Campbell says the county has “about $300,000 left” and should make payroll June 29.
“It’s going to be tight,” Campbell says.

Document and data lost or destroyed
• Zaday alleges, per conversations with Burchett, that during finance department staff turnover in 2004, documents and hard drive data were lost or destroyed. Schiro says 2003 marks beginning of financial troubles.

June 26, 2007

16 additional layoffs
• During a special budget meeting, the board officially approves another revised budget and 16 additional layoffs. Moomaw and Zaday vote in favor, Schiro against. Responding to public concerns, the board acknowledges fund balances remain inaccurate and the budget is not balanced.

June 26, 2007

BoCC cuts 16, approves amended budget
• During a special budget meeting, the board approves another 16 layoffs, and virtually all departments are hit, including planning, the treasurer’s office and the sheriff’s department. The public works department takes the biggest hit with the loss of the county engineer, five equipment operators, a solid waste operator, two bus drivers, a fleet mechanic and the fleet supervisor. The June 26 cuts bring the layoff total to 38, although the staff reduction since the crisis began equals 74 positions and a 34-percent reduction in the county labor pool — from 217 employees down to 143 — a difference of 36 positions. The 36 positions amount to one termination, employees that left on their own accord, and positions that were budgeted for 2007 but were not filled.

• Although the second round of cuts is not intended to solve the financial crisis, Archuleta County Special Projects Manager Sheila Berger, speaking for County Administrator Bob Campbell who is out of town, says the 16 layoffs and other reductions in operating and capital costs represent a $600,000 budget reduction. Although the 2007 shortfall is estimated at nearly $2 million, previous staff and program cuts, coupled with the recent round of cuts, and other components of the financial recovery strategy is inching the county closer to its goal.

“A total lie”
• One county staffer describes the approved amended budget as “a total lie.” And during the meeting, the board acknowledges that, although expenditures have been amended, fund balances remain inaccurate, revenues are inflated and the budget doesn’t balance. Commissioners Bob Moomaw and Ronnie Zaday acknowledge the budget’s shortfalls and state that with the county ledgers and fund balances almost totally inaccurate, attempting to balance the budget before the forensic audit is complete would be futile.

Moomaw and Zaday vote for the cuts and amended budget and Commissioner Robin Schiro votes “nay.” Schiro says the amended budget violates statute, and that acknowledging discrepancies isn’t enough. She says staff should update numbers where possible, and even under the circumstances, the board should review and approve the most accurate budget possible.
Before the June 26 hearing, Campbell explains that adopting a revised budget is a formality required to cut funding for positions in elected officials’ departments. He also says the budget is completely inaccurate.

Another line of credit
• Following the BoCC meeting, the commissioners begin agenda review for their July 3 meeting. On the proposed agenda is a decision whether to use the courthouse as collateral to seek a $1.5 million line of credit. According to staff, the money would be used to cover payroll and operating expense for July and until the Hot Springs Boulevard property sells. County Attorney Teresa Williams says the town remains intent on purchasing the property.

June 27, 2007

Burchett termination
• Moomaw alludes to former Finance Director Bob Burchett’s termination in a comment made during a June 19 BoCC meeting, and during an interview with SUN staff June 27, Moomaw confirms that Burchett, was in fact, fired.

June 29, 2007

Forensic audit pending
• Campbell says contract particulars are being finalized with the Department of Local Affairs. He says once the contract is complete and signed, the forensic audit team can begin. He anticipates the start date as either July 5 or July 9, 2007.

Cash on Hand
• Campbell says as of June 27, the county has about $1 million in cash on hand.

Revenue stream a trickle
• Campbell says by the end of June, the county’s revenue stream will essentially dry up.
“Now things start to get lean,” Campbell says.

Upcoming payroll
• Campbell says the county has enough money to make the July 13 payroll, yet he says one of the keys to surviving 2007 without defaulting is the sale of the Hot Springs Boulevard property.
“That $1.2 million has got to come from somewhere, otherwise, there is no question we won’t make it until the end of the year,” Campbell says.

July 3, 2007

Payroll secure until month’s end
• Archuleta County Administrator Bob Campbell says the county can make the July 13 and July 29 payrolls, although by Aug. 8, revenue projections indicate lean times for the remainder of 2007.

Council to pursue purchase of property
• Under the direction of Pagosa Springs Mayor Ross Aragon, the Pagosa Springs Town Council agrees by unanimous vote to pass an emergency ordinance that authorizes the purchase of county property on Hot Springs Boulevard across from Town Hall. The decision to pursue the purchase is not without discussion, and some council members question whether the move is fiscally responsible.

Town and county fiscally linked
• During the proceedings, council member Darrel Cotton summarizes the town and county’s fiscal linkage, “If the county fails, we fail, everybody fails.”
And whether the town’s purchase is perceived as a county bailout or a legitimate investment for future town facilities, the negotiations illustrate the interconnected nature of town and county finances.

For example, the two entities share sales tax revenue; the county leases space within Town Hall for its Human Services Department — a lease that has gone unpaid for two years amounting to $60,050 in unpaid lease payments to the town; the town has agreed to provide all funding ($29,461 for the remainder of 2007) for a narcotics officer position — a position that was supposed to be funded jointly by the town and county; and the town has agreed to contribute $13,643 to keep the sheriff’s dispatch center adequately staffed after county layoffs threatened dropping per-shift dispatch staff to dangerously low levels.

Terms of the sale
• According to town documents, the sale price for the 4.87 acres on Hot Springs Boulevard is $1.2 million, with annual payments of principal and interest of $96,454 and a balloon payment of $455,927 at the end of the 10-year term. As of June 14, the interest rate was 5.02 percent, with the possibility of financing from Citizen’s Bank.

“Cornerstone” of recovery plan
• While addressing the council regarding the purchase, Campbell calls the sale, the “cornerstone” of the county’s recovery plan.”
“If we crash, the consequences on the town and the community will be horrible,” Campbell says.
• To illustrate the county’s dire financial situation, Campbell tells the council, “Just to put it (the financial situation) into perspective, in order to balance the budget, we’d have to cut county staff to 35 employees.” Thus, Campbell argues, the importance selling the Hot Springs Boulevard property.

An integral part of the puzzle
• Campbell says the Hot Springs Boulevard sale — $1.2 million, plus the sale of other county properties — estimated at $205,000, plus $150,000 garnered from auctioning county equipment, will bring the county close to making up the $1.8 million shortfall for 2007. Campbell says other program and project cuts and strict oversight on spending should get the county close to making up the entire shortfall.

July 6, 2007

Prior and board meet in mediation
• Archuleta County Assessor Keren Prior and the Board of County Commissioners meet in court-ordered mediation to resolve issues related to Prior v. Board of County Commissioners. Prior sued the board June 1 over financial crisis-related staffing cuts — cuts, Prior argued, were excessive and unfair.
• County Attorney Teresa Williams says participants in the mediation are bound by confidentiality agreements, however, when the settlement agreement is approved and filed with the court, the terms of the settlement will be public record. Williams anticipated about two to three weeks for the drafting and filing of the settlement agreement.

July 10, 2007

Forensic audit begins
• Campbell announces that Clifton Gunderson LLP has begun the forensic audit.
• Archuleta County Special Projects Manager Sheila Berger said the firm will spend the first week familiarizing themselves with county documents and accounting procedures, followed by the implementation of the first major round of “data mining.”
• Campbell says on July 12, Clifton Gunderson staff will meet with staff at Wall, Smith, Bateman & Associates Inc. (the county’s 2005 audit team) to obtain documents and information on county finances gleaned during Wall, Smith and Bateman’s recently-completed 2005 audit.
• Campbell says the District Attorney also has access to records and information, and the DA’s office will be working with the Colorado Bureau of Investigation to conduct research and undertake county staff interviews.

July 17, 2007

Citizen’s Financial Oversight Task Force provides first public briefing

• During the Board of County Commissioners (BoCC) meeting, the county-appointed Financial Oversight Task Force provides its first public briefing with six recommendations for the board, including: clarify the scope of work and deliverables from the forensic auditing team of Clifton Gunderson; make the hiring of a degreed, experienced financial controller (finance director) the county’s top staffing priority; the task force reminds the BoCC that they are responsible for responding to audit issues, and ensuring the appropriate county staff respond to audit issues in a timely and appropriate manner; explore what it means for the county to default and what role will the state play if default occurs; require the BoCC to read past audit reports to ensure the commissioners do not allow repeats of past weaknesses or oversights; and seek immediate help in the finance department with an interim controller or finance director to assist with finance department staffing, and implementation of policy and procedures.

Task Force “clouded in suspicion”

• Eddie Bennett of the Archuleta County Citizen’s Alliance says citizens are suspicious of the task force, because they don’t know who the task force members are or what they are doing.

• In the June 28, 2007, edition of The SUN, task force members’ names are published: Larry Allen, Alvin Bledsoe, J.R. Ford, Marion Francis, Richard Lindblad, Les Mundall, Bob Nordmann and John Ranson.
County staff, under the guidance of Archuleta County Administrator Bob Campbell, recommended the team, and the BoCC ratified their nominations.
Among the team’s tasks: provide recommendations to weather the immediate financial crisis and ensure solid financial groundwork is laid for the forthcoming 2006 audit and the 2008 budget. According to Campbell, the team operates in an advisory capacity, and it is staff and the board’s purview, to accept or deny their recommendations.

Town continues pursuit of county’s Hot Springs Boulevard property

• According to Campbell, the town continues to pursue the purchase of the county property on Hot Springs Boulevard, however, questions remain whether the town can procure financing in light of the property’s zoning and deed restrictions. Although Archuleta County Commissioner Bob Moomaw and Campbell say the deal remains tenuous, Moomaw says the county is exploring other ways to make up the $1.8 million shortfall. The $1.2 million garnered from the sale remains the cornerstone to the county’s 2007 recovery strategy.

County may seek line of credit

• With the outcome of the Hot Springs Boulevard property uncertain, Campbell says the county may seek a $1.5 million line of credit as a second line of defense should the property sale crash. To secure the loan, the Archuleta County Courthouse would serve as collateral.

Line of credit creates concerns

• Seeking the line of credit draws mixed responses, and Campbell says the terms of the loan would require repayment by the end of 2007. Thus, with the county already facing a $1.8 million shortfall, and the possibility of deeper program and project cuts, the question remains: How will the county pay the loan back?

Situation critical

• In discussing ways the county might bridge the $1.8 million gap — assuming $1.2 million received from the Hot Springs Boulevard property sale — Moomaw says sales tax revenue and emergency reserves could make up the difference.
“Do we have it solved how to get to the end of the year? No,” Moomaw says. “I think it’s important that the people understand just how serious this is.”

Forensic Audit Status Report

• Archuleta County Special Projects Manager Sheila Berger reports that staff from Clifton Gunderson’s forensic audit team met with county staff July 11 and 12, 2007, to gather electronic data, hard copy financial documents and personnel information linked to county staff involved with finances since 2000.

Clifton Gunderson contract refined

• Berger says county staff will work with Clifton Gunderson next week to better define the scope of work, a timetable for completion, and deliverables. Berger says of particular necessity to the county is the firm tying up all loose financial ends such that the 2006 audit can be completed with little difficulty, including recommendations and implementation of procedures to establish tighter internal controls. Part of the dialogue will include a discussion on how deep the firm will probe for illegalities or criminal activity. Berger says DoLA funding (currently $150,000 for the project) plays a vital role in determining the length of the project and depth of the probe.

July 24, 2007

No more layoffs
• After consulting with county staff and analyzing financial projections, Archuleta County Commissioner Bob Moomaw says, no more layoffs.
“We don’t foresee any more personnel cuts, and we’re in the process of reorganizing county government to function at this level,” Moomaw says. “Nor is the county considering additional cuts or changes to the employee health benefit plan, and as key positions come available due to attrition, we will rehire.”

Current staffing and layoff numbers
• County documents indicate 34 layoffs and 27 vacancies, equaling a work force reduction of 29 percent. Staffing cuts, positions not filled due to financial constraints, and those who have left on their own accord, have brought the county work force down to 145 employees, from about 217.

Although cuts have rocked virtually all county departments, road and bridge, the sheriff’s and assessor’s offices are some of the departments hit hardest.

Current projections indicate the workforce reduction will shave $1.29 million from the budget by year’s end.

“Rounding a corner”

• Moomaw says recent financial projections such as strong sales tax projections for the last quarter of 2007 — up about 5.5 points over last year — steady reductions in accounts payable ($521,243 July 10, $356,925 July 16 and $286,797 July 24), strong interdepartmental cooperation and congruency in balance sheets between finance and the treasurer’s office, and identification and resolution of unknown expenses carried over from 2006, indicate the county is ‘’rounding a corner,” and that balancing the budget by year’s end is becoming ever more likely.

Shortfall revisited
• Looking back over the crisis, initial estimates put the county’s 2007 shortfall at $2.6 million. By June 21, and after 22 forced layoffs, contract and payment renegotiations and project and program cuts, Archuleta County Administrator Bob Campbell announced the county had made up $800,000 of the $2.6 million, bringing the total shortfall down to $1.8 million for the remainder of 2007. On June 26, the county approved 16 additional layoffs (county documents conflict on layoff numbers — SUN analysis indicates 38 layoffs, while county documents say 34) and layoffs, coupled with a variety of program cuts, reductions in operating and capital costs, deferments and other contract negotiations have steadily whittled at the shortfall, bringing it down from $1.8 million June 21, to $1.56 million July 10, to $1.49 million July 16, and to $1.47 million as of July 24.

Recent successes
• Moomaw says the following recent financial success are building confidence the county will weather the storm: $117,00 paid to Wells Fargo for leases on road and bridge equipment; $82,000 paid for the airport lease; and $150,000 garnered from auctioning county equipment. Although the aforementioned figures only reduce the estimated shortfall to $1.12 million, Moomaw and Campbell outline the final piece of the recovery strategy.

Plan A, Plan B, Plan C
• Plan A, say Moomaw and Campbell, focuses on sealing the deal between the town and county for the town’s purchase of 4.87 acres of county-owned vacant land on Hot Springs Boulevard across from Town Hall. The sale will put $1.2 million back in the county coffers.
County Attorney Teresa Williams has reviewed the purchase agreement, and the town must secure financing and the sale must pass muster when it goes before bond council.
• Plan B involves the county obtaining a $1.5 million loan — with the courthouse as collateral — to bridge funding gaps until the Hot Springs Boulevard property sells.
Campbell says he is meeting with bankers later in the week to negotiate terms and is optimistic that a key sticking point of previous loan explorations — namely payoff by the end of 2007 — can be negotiated more favorably for the county.

Plan C
• Campbell says the town and county have begun a dialogue on other property transactions, such as the town buying into the county’s road and bridge facility. At this stage, talks remain largely conceptual. Thus, details of the transaction and how future operations might transpire remain scant, although proponents of the deal say it could lead to greater cohesion between town and county governments and more efficient road operations.

Forensic audit update
• Archuleta County Special Projects Manager Sheila Berger says staff from the forensic auditing team of Clifton Gunderson LLP are in Pagosa Springs interviewing personnel in finance administration and the treasurer’s office — data mining continues.

Revenue stream “bone dry”
• Although Campbell and Moomaw are confident in revenue projections and other economic indicators, Campbell says the revenue stream from July 24 to the end of 2007 is bone dry. He says the county will have to hang on until the first major infusion of property taxes in February 2008.

July 25, 2007

Cuts to charity
• Campbell drafts and mails a letter to 25 organizations stating he will recommend the county not “designate or budget any charitable donations for our 2008 budget.” In the letter, Campbell says the board will review funding requests from organizations that provide “a direct and necessary service to Archuleta County,” on a case-by-case basis.
Campbell encourages the organizations to seek alternative funding sources for 2008. Those affected are: 9Health Fair ($250), American Cancer Society ($250), American Red Cross ($2,500), Archuleta County 4-H Livestock ($300), Archuleta County Education Center Inc. ($10,000), Archuleta County Victim Advocacy Program ($12,000), Archuleta Economic Development Association ($30,000), Colorado Alternative Sentencing Program ($2,000), Colorado Counties, Inc. Junior Livestock Sale ($100), Community Connections, Inc. ($3,520), Crossroads Psychiatric Care Center ($25,000), Housing Solutions for the Southwest ($1,500), Lower Blanco Property Owners Association ($1,500), Pagosa Springs Music Boosters ($2,000), Music in the Mountains ($3,000), Pagosa Arts Alliance ($4,000), Pagosa Fiber Festival ($500), San Juan Conservation District ($2,000), San Juan Historical Society ($500), Seeds of Learning ($2,000), Southwest Land Alliance ($10,000), Special Olympics Colorado ($250), Southwest Colorado Mental Health Center ($15,000), Tara Historical Society ($17,750), Volunteers of America ($900).
The contributions to the above agencies total $146,820.

July 25, 2007

Forensic audit strategy develops
• Members of the citizen’s Financial Oversight Task Force Audit Subcommittee meet with the forensic audit team from Clifton Gunderson LLP to develop a tentative work plan. Initial estimates put completion of the forensic audit at four to six weeks; however, the process could be protracted depending on the nature or complexity of the findings. The Audit Subcommittee is one of three subcommittees made up of task force members, with each subcommittee charged with a specific task. As such, the Audit Subcommittee will work closely with forensic auditors and the 2006 auditing team. The other subcommittees are: the 2008 Budget Subcommittee and the Treasurer’s Office Subcommittee.

July 30, 2007

2008 budget groundwork begins
• The Financial Oversight Task Force’s 2008 Budget Subcommittee begins strategizing for the 2008 budget cycle, including analyzing projected revenues and expenditures. The process is one of the critical first steps necessary to balancing the budget in ’08.

Aug. 1, 2007

2008 budget groundwork continues
• Department heads and elected officials meet with Larry Allen of the Financial Oversight Task Force to discuss organizational structuring as a precursor to the 2008 budget process. The meeting illuminates which county processes and procedures are duplicated, and which aren’t covered at all. The intent of the meeting is to help department heads understand how county departments are interrelated, with a goal of improving and maximizing efficiency under current staffing levels. Archuleta County Special Projects Director Sheila Berger says the process is critical, because staffing — at fewer than 150 employees — will remain largely static for the next two to three years. Following this Aug. 1 meeting, county departments set organizational meetings of their own for Thursday, Aug. 9, and all county offices will be closed 1-5 p.m.


Aug. 7, 2007

Citizen’s Financial Oversight Task Force provides second public briefing
• John Ranson, speaking for the group, says the task force has no new recommendations aside from the six put forth July 17, ( clarify the scope of work and deliverables from the forensic auditing team of Clifton Gunderson; make the hiring of a degreed, experienced financial controller — finance director — the county’s top staffing priority; the task force reminds the BoCC that they are responsible for responding to audit issues, and ensuring the appropriate county staff respond to audit issues in a timely and appropriate manner; explore what it means for the county to default and what role will the state play if default occurs; require the BoCC to read past audit reports to ensure the commissioners do not allow repeats of past weaknesses or oversights; and seek immediate help in the finance department with an interim controller or finance director to assist with finance department staffing, and implementation of policy and procedures) however, he urged the board to expedite hiring a permanent or temporary qualified controller before the forensic audit is complete. Initial salary estimates indicate the county will likely need to pay between $90,000 and $110,000 to secure a qualified candidate.

Budget subcommittee
• The task force’s budget subcommittee, working with county staff, has completed a cash-flow model that can be used to project monthly balances. In addition, the subcommittee has completed initial revenue projections for 2008, and will use the data throughout the budget cycle to assess the feasibility of expenditures.

Audit subcommittee
• Ranson reports the audit subcommittee continues to meet with county staff, forensic and financial auditors.
The forensic audit, now in its fourth week, continues.
The 2006 financial audit was due July 31, however, the 2006 audit cannot be completed until the forensic audit is complete. The county has asked for, and will likely receive a 60-day extension from the state.

Task force does not endorse or concur with Commissioner Bob Moomaw or county staff’s statements in the July 26, 2007 SUN article “Rounding a corner”

• At particular issue is the ongoing, ephemeral nature of county financial statements — a problem that has persisted since the crisis began, the county’s willingness to pursue a $1.5 million loan, using the courthouse as collateral, when it is unclear when and how the county will pay the money back, and assertions that no further lay offs will be necessary.

“We understand that the county may be forced to take out a loan using the courthouse as collateral, but are concerned about the possible impact of debt encumbrance on the county’s future operations. Recognizing that we have no authority in the matter, the task force nevertheless requests to be allowed to review any such loan agreement prior to its execution,” Ranson said in a prepared statement.

“We’re on our own”
• Archuleta County Administrator Bob Campbell reports that a state bailout, should the county default, is not an option.

“We’ve explored this with DOLA (the Department of Local Affairs), CCI (Colorado Counties Incorporated) the governor’s legal staff, and the state is unlikely to intervene unless there are state dollars involved,” Campbell said.

Campbell also indicates the state has likely reached its threshold on supplying grant funding to assist the county with the crisis.