La Plata County's finances are on an unsustainable path, County Manager Joe Kerby and Finance Director Diane Sorensen told a small group of community members on July 23 at the courthouse.
The county's three main budget categories are general government, road and bridge, and human services. Each gets property tax revenue, with the overall tax levy at 8.5 mills. The focus was on the first two categories.
General government revenue has fallen 30 percent since 2009, Sorensen said, and road and bridge revenue has fallen 45 percent. "Road and bridge spending has only decreased 9 percent," she added.
Since most road and bridge spending goes for road maintenance, it's hard to decrease spending without cutting maintenance, she said.
Road and bridge operations have been drawing down the budget fund balance, with revenues at only 80 percent of spending, she said. Along with property tax, road and bridge gets revenue from sales tax and state gasoline taxes.
The road and bridge fund balance was $7.37 million at the start of 2013. It was down to $4.67 million at the end of 2013 - below budgeted spending commitments.
Total county revenue decreased by $850,000 last year, Sorensen said. Property taxes accounted for 39.5 percent of total revenue, while sales taxes accounted for 26.5 percent.
For 2014, property tax revenue will be down to about 25 percent of total revenue, with sales tax at 24 percent. The highest revenue source this year (29 percent) is intergovernmental such as state and federal transfers. Sorensen called that scary, citing the federal spending sequestration.
Unlike road and bridge, the fund balance for the general fund increased during 2013 from $53.97 million up to $57.7 million. But Sorensen noted the county is facing yet unknown costs from the State Line wildland fire in 2012, and for remediation of ground pollution dating back to the 1980s at the county jail.
The 2014 budget has about $71 million of spending and $60.8 million in revenues.
For 2014, fund balances are expected to go down in all three of the main budget categories, Sorensen said. Property tax revenue is projected to be back below where it was in 2005, after hitting its high point of $29.7 million in 2010. This year it is around $15 million.
Sorensen and Kerby showed a graph of sales and property tax revenue since 2002. In 2002 they totalled just under $25 million. This year they total $30 million, down from more than $40 million in 2010.
Kerby said he keeps a copy of the chart on his office door as "a constant reminder of challenges we face."
This whole discussion was part of the start of the county's budget process for 2015. Kerby said, "Not everything is doom and gloom. We're beginning to see some real positive signs in terms of the economy."
The county assessor is predicting property tax revenue will increase by about $1.4 million next year, but at that rate it will take a long time to recover the $15 million decrease that happened over four years, Kerby said.
The big drop was attributed in large part to falling assessed valuations for natural gas production and prices, and next year's projected increase also is tied to natural gas.
"We feel we are at the bottom of that valley" for assessed valuations, he said. Sales tax revenue has been growing since 2012, but not enough to make up for the drop in property taxes.
"This year we had to allocate an additional $800,000 of sales tax from the general fund to road and bridge to keep it on life support," Kerby said. "We anticipate having to do that again in 2015."
The joint Durango and county sales tax fund balance also is on track to be down to zero by around 2018, he advised. That's what funds the Durango Public Library and the La Plata County Senior Center.
Financial sustainability is one of the priorities during the 2015 budget process.
"Over the last six months, we've developed a capital improvements plan for facilities and road and bridge" for the next 10 years, Kerby said. He wants to hand that off to the county's long range finance committee to make recommendations to the county commissioners.
Audience members last week included former County Commissioner Bob Lieb Sr., who has been working with that committee as a non-member. He was skeptical of the long range capital improvements plan.
Lieb was the only person at the meeting to utter the words "tax increase," although he clarified, "I'm not saying I'm advocating for one."
Earlier in the meeting he noted any property tax increase hits business properties much harder than residential properties because of the assessment ratio formula in the Gallagher Amendment, approved by state voters in the early 1980s.
As for a sales tax increase, Lieb speculated that some of the items in the capital improvements plan could be done for much less than what is listed, and those costs will turn voters against approving a sales tax increase.
Among the capital improvement items is remodeling the courthouse to accommodate federal courts.
Audience member Brad Blake, who is running for the county commission seat currently held by Lieb's son Bobby, commented, "I can't think of a worse partner than the federal government."
Lieb said, "Brad's concern is my biggest concern. The (courthouse) lease with the GSA. You need to can that."
Earlier in the meeting, Kerby said money budgeted for the courthouse remodeling will not be spent until the lease is signed with GSA. The lease is still being negotiated, he said.
The county has purchased the nearby Vectra Bank building and as of January was estimating a $3.5 million cost to renovate that to accommodate the county offices that will move out of the courthouse.