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Council extends revenue, spending policy

Staff Writer

A policy to enhance the financial stability of the Town of Pagosa Springs, Resolution 2012-19 was recently presented to town council by James Dickhoff, the town planner, on behalf of Town Manager David Mitchem, who was unable to attend the last regular town council meeting due to medical issues.

“In general, it is a means for us to be proactive,” Dickhoff explained. “As we get the indication that we are seeing some reduced sales tax collections, we can react pretty quickly. We’ve instituted this policy over the last three years and it has worked very well for us.”

Town council unanimously passed the resolution, which was an extension of a system implemented in 2009 whereby town staff monitors the town’s sales tax revenue on a monthly basis, reporting fluctuations from the prior year’s and month’s revenues to the town council.

Other tenets of the policy include postponing capital equipment purchases until the last half of 2013, unless there is approval by the town council, putting a 3-percent cap on funding for service organizations, and setting the 2013 budgeted sales tax revenue at the same level as the 2012 actual revenue, which is projected to be $3,195,110 by the end of the year. Those revenues will be split equally between the general fund and the capital fund.

“Previously, we were free-writing budgets that were reductions from a full budget of five, ten or fifteen percent,” Dickhoff continued, “and then we would automatically implement those. This might be a little bit of a different strategy. As we deal with it (any possible revenue reduction), we identify the important expenditures versus the non-important expenditures, and make those adjustments accordingly as we get that data in.”

“A number of Pagosa Springs businesses have experienced excellent sales in 2012,” Mitchem stated in his written explanation of the resolution, claiming some businesses have had their best year ever.

“However, other Pagosa Springs businesses have either closed or moved to other communities. The local economy remains fragile. Therefore, staff believes it is important to be able to respond quickly to economic downturns and in a manner that is directly proportional to the reduction in revenues. Also, expenditure reductions should take into account the relative value of specific programs or services provided to the community.”

Section 3.9 of the Town of Pagosa Springs Home Rule Charter describes the town council’s authority and responsibility to anticipate revenues and adopt a balanced annual budget.

Resolution 2012-19 lays out guidelines for the town manager as to when and how to reduce town expenditures:

“Whenever the percentage of sales tax revenues collected falls more than 5 percent below the average revenues collected for the same period in the preceding two fiscal years and the percentage of sales tax revenues collected in the previous month (or previous two months) falls 5 percent below the average revenues collected for the same periods in the preceding two fiscal years, the Town manager shall implement a 7 percent reduction in sales tax related expenditures.

“Implementation shall include apprising department heads of the shortfall and working with department heads to conduct a review of all budgeted programs and services and categorize each into the following levels of service: 1) Essential Services; 2) Highly Desirable Services; and 3) Non-Essential services. The town manager shall initiate budget cuts or expenditure freezes eliminating Non-Essential Services based on their priority ranking. The town manager shall review departmental staffing patterns with primary focus directed toward reducing or eliminating part-time and temporary employment expenses. The town manager will determine which position will be filled on a case by case basis.”

The resolution goes on to describe even more drastic measures to be implemented in the case of a 10 percent reduction in revenue, and finishes up with what will happen if there is a 15 percent reduction in sales tax.

However, if any of these situations occurs and then is followed by two months’ worth of growth or recovery, the town manager is authorized to return to the original 2013 budget as approved by town council.

According to a report issued this week by Archuleta County Finance Director Diane Sorensen, “October sales tax revenue received in December 2012 totals $495,701. This is an increase of $870 or .18% over October 2011. To date Sales Tax revenue is up 1.19% over 2011.”

So far this year, May and July are the only two months that have seen any declines compared to the average of the same periods in 2011 and 2010. May 2012, with $474,204 worth of sales tax revenue collected, was down $14,446 or 3 percent when compared to the average for May of 2011 and 2010, which was $488,650. July 2012, with $631,648 worth of sales tax revenue collected, was down $2,041 or .3 percent when compared to the average for July of 2011 and 2010, which was $633,689.

At no point during 2012 did sales tax revenue drop 5 percent compared to the average for 2011 and 2012, let alone for two months in a row, which is the requirement for instigating the measures described by the ordinance outlined in resolution 2012-19.

Breaking the sales tax report for October down by sector, revenue generated by retail trade, the largest portion of Archuleta County’s economy, went from $242,798 in October 2011 to $233,266 in 2012, a decrease of $9,532 or 3.9 percent.

Sales tax revenue generated by accommodations and food service, the second largest portion of Archuleta County’s economy, went from $79,771 in October 2011 to $80,110 in 2012, an increase of $339 or .4 percent.

For the construction industry, sales tax revenue fell from $13,504 in October 2011 to $13,326 in 2012, a decrease of $178 or 1.3 percent, while revenue from manufacturing rose from $23,261 in October 2011 to $30,758 in 2012, an increase of $7,497 or 32 percent.

Sales tax revenue generated by wholesale trade rose from $21,618 in September 2011 to $28,334 in 2012, an increase of $6,716 or 31 percent, while revenue from real estate fell from $18,007 in September 2011 to $11,749 in 2012, a decrease of $6,258 or 35 percent.

Sales tax revenue generated by mining, utilities, information, scientific and technical service, and health care and social service all rose slightly over the year, while finance and insurance, educational services, and arts, entertainment and recreation reported slight declines.

ed.fincher@pagosasun.com

This story was posted on December 13, 2012.