Grand County budget could face deficit in 2016
December 30, 2015
Falling tax revenues coupled with years of deficit spending have put a pinch on Grand County as it enters the 2016 budget process.
County Finance Director Scott Berger told the board of county commissioners at its Sept. 22 meeting that action must be taken to balance the budget and avoid bankruptcy going into 2017.
"Beyond what we've spent and our commitment to Highway 9, I would suggest that we freeze capital starting today for the foreseeable future," Berger told the board.
Speaking later to the Sky-Hi News, Berger said the county has tried to maintain a high level of services to the public as assessed values and revenues have continued to drop over recent years.
"I don't think they thought expenses would rise as fast as they did," Berger said. "It just kind of added up the fund balances faster than they thought it would. They didn't expect to be in this situation."
The county started 2013 with $25 million in its coffers and ended with $24.8 million, according to county budget documents.
From the beginning of 2014 to the end of 2015, the county's total fund balance was budgeted to drop from $24.2 million to $7.9 million, documents state.
In reality, the county will have about $14 million at the end of 2015, Berger said, but based on current department spending projections, the figure could drop to around $5 million at the end of 2016, leaving the county facing an $8 million to $10 million deficit for the next year.
Commissioner James Newberry said the county had made a conscious decision to spend down its fund balances after it was criticized for keeping such large reserves.
The county devised a four-year plan with the objective of spending down its fund balances while maintaining the same amount of service as in previous years, Newberry said.
Commissioner Merrit Linke echoed Newberry's sentiment.
"We felt that that is the people's money, and it's nice to have these big savings accounts, but when the people in the county don't have big savings accounts it doesn't seem right to maintain this big reserve rather than spending it on services for the people," Linke said.
Newberry said the recent announcement was a surprise.
"Up until a month or so ago I was being told that we were on track and meeting projections, so then when I heard the other day that we were not, what we've done is directed staff to go back and find out why that has changed," Newberry said.
Linke said he felt the board has budgeted conservatively during the three budget processes that he's participated in. He also said that the county was just entering the 2016 budget process and portraying the current situation as dire is premature.
"The sky is falling thing, I'm not sure that that's truly accurate," Linke said. "Yes, this is something that we want to get ahead of, and yes we're not going to stick our heads in the sand and ignore it."
Capital expenditures, operating costs drain funds
The county has made a few big-ticket capital expenditures in the last few years, but operating costs also continue to rise, Berger said.
"Providing services – all those costs have gone up as well," he said.
Major capital expenditures include contributions to the State Highway 9 project and capital investments in vehicles and equipment for the county's EMS and Road and Bridge departments, Berger said, adding that those are "well needed" investments.
"We made some big expenditures in those areas and that has contributed to the reduction in fund balance," Berger said.
Meanwhile, property tax revenues have dropped from $14.8 million in 2011 to $9.3 million projected in 2015, according to county budget documents.
The recent announcement that Freeport-McMoran, the county's largest tax contributor, would be scaling back production at its mining and milling operations also took the county by surprise.
Still, the current budget situation doesn't come as a total surprise to Berger, he said.
"I track all of the finances, so I saw them spending down fund balances," Berger said. "I saw us passing deficit budgets."
Berger said he'd expressed concerns about where this type of deficit spending could end up, but he wasn't sure whether those concerns made it to the board.
"I don't report to the board of county commissioners," Berger said. "I report to the county manager, and this was the management strategy that was presented to the board. I'm just part of the management team."
Berger said he was also aware of public pressure on the board to spend down fund balances.
Possible solutions will take time
Berger presented the board with a list of possible budget remedies at its Sept. 22 meeting.
Among his suggestions were no raises, promotions, cost of living allowances or new positions from now through 2016.
The document also suggested a four-year hard freeze on capital spending.
Berger said he would suggest that department heads be given a target for spending in 2016.
"We need to very clearly communicate to the operating officials in the county where we need to be, and they need to work very closely with the commissioners to get there, and by there I mean the balanced budget where your revenues and expenditures are the same number," Berger said.
Newberry said the board needed learn more about the current situation and "adjust the budget accordingly."
Both Newberry and Berger said remedying the situation would take some time.
"This problem didn't come up in a year and we're not going to resolve it in a year, but I think we need to clearly communicate that we will not be able to provide the level of services that we have been," Berger said.
The board will meet with department heads on Sept. 25.
Both Newberry and Linke said they weren't worried about the county's current financial position.
"I'm not in a panic mode," Newberry said, "and I don't think anyone should be."