|  |
 |
|
A Transparent Step in the Right Direction |
Mike Stoll | 4/30/08
|
|
|
|
|
|
|
|
|
|
I recently read Daniel Ellsberg’s book Secrets, his memoir of Vietnam and the Pentagon Papers. Ellsberg lucidly describes the utter lack of transparency between the executive branch of government and the citizens, a veil of secrecy cultivated through several administrations that perpetuated a culture of “disinformation” and bad decision making without scrutiny.
Each of us in a democratic, pluralistic society has the civic responsibility to be involved in the affairs of government. For most of us that means voting. Beyond that symbolic act, our participation is often constrained by the demands of “doing life.” Sometimes it takes a catastrophic event — an unpopular war, a county financial meltdown — to grab our attention and bring us off the sidelines and, in a manner of speaking, into the game.
 This thought occurred to me while attending Monday’s County financial work session, and it was precipitated by a remark from the audience late in the meeting. Nan Rowe, a former candidate for the seat of County Commissioner, commended the County Administration and current Commissioners for the open and frank discussion of finances. In contrast, she paraphrased an unnamed former Commissioner who once suggested to the audience that they all go home and just leave governing to the elected officials.
That’s not likely to happen again anytime soon, on a number of fronts.
Monday’s work session was conducted by Greg Schulte, Interim County Administrator, and information was dispensed in a well organized and articulate power point presentation. Archuleta County runs on a calendar fiscal year, and the purpose of the meeting was to discuss the financial state of the county through the end of the first quarter of 2008. Elected county officials, department heads and members of the financial task force were in attendance. It is anticipated that a similar work session will be convened at the end of each quarter.
The first half of Schulte’s presentation touched on three salient topics: first quarter revenues, first quarter expenditures and the deficits that existed in certain County funds at the end of 2007. In response to the latter, he then described a novel Interfund loan proposal.
First things first. The 2008 budget is projected to be balanced — expenditures will not exceed revenues. Living life large and beyond the County’s means is intended to remain a bad memory, not to be repeated. To accomplish that goal, revenues must keep pace. The primary revenue sources for the County are property tax, and to a lesser degree, sales tax. The County also receives funding from grants (mostly federal, some state).
A modest 2% increase in sales tax revenue was projected for 2008. At the end of the first quarter, the County appeared on track by collecting 24% of the projected $1.7 million for the year. With inflation for 2008 currently running at 3.8% it begs the question whether this modest increase will actually represent growth, but the basic question is whether or not the county’s bottom line will be served — and along that line, at least, the budget seems to be tracking.
Property tax revenue for 2008 is projected to be $15.6 million. Schulte indicated that by the end of the first quarter $5.3 million in property tax, or 34% of expected revenue, had been collected. Commissioner Schiro noted that most property tax is collected by the end of June and wondered if the receipt of 34% of expected revenue by the end of March could represent a shortfall trend. Schulte commented that “…probably the better information for your question is, what’s normal?” but that was not answered. According to Finance Director Don Warn, a much clearer understanding should exist toward the end of the second quarter, but neither he nor Schulte saw reason for concern at this juncture.
One area of obvious shortfall in 2008 is building department revenue. The $300,000 budgeted in revenue from building permits represents only 1.2% of the total county budget, so missing the mark is perhaps less severe than, say, a comparable decline in property tax revenue. Even so, it can make a tight budget squeak, and points to a problem.
The problem, as Schulte explained, is that by the end of the first quarter only 25 building permits had been issued by the county, which is just 38% of the 5 year average of 65 for the same time frame. That sounds bad.
In digging a little deeper, I found that of those 25 permits issued this year, only 5 were for new single-family homes and none were for commercial building – most 2008 permits have been for remodel or repair. By comparison, of the 57 county building permits issued by the end of the first quarter last year, 31 were for new single-family homes, or six times greater than this year. That sounds worse.
Schulte estimated that actual building department revenue could lag by at least half of projected revenues, or $150,000. Additionally, an unbudgeted cost of living allowance (COLA) estimated to be worth $110,000 was awarded to staff in January and a proposed, but unbudgeted, merit increase estimated at $55,000 is also under consideration for later this year.
It is Schulte’s belief that salary savings in the current year (read, fewer staff) will offset the cost of the COLA. He also noted that $200,000 budgeted in the Contingency fund (“rainy day fund”) could cover the building revenue shortfall and the merit increase if necessary. Schulte made it clear, though, that further revenue shortfalls could jeopardize the merit increase, and consideration of the increase has been tabled for now.
Building revenue shortfalls and some unbudgeted payroll costs notwithstanding, Schulte was optimistic that County revenues were “coming in as desired.” He coupled this with the positive observation that through the end of the first quarter, expenditures for all County funds were lower than anticipated – the County had spent $2.9 million, or only 11% of budgeted expenditures, by the end of March. Schulte characterized the decreased expenditures as “outstanding,” but also noted that, “We need to continue to be mindful.”
Schulte next explained the concept of, and the need for, the proposed Interfund loan. The County ended fiscal year 2007 with deficits in several funds (fleet, airport, human services, nutrition and capital improvement) totaling more than $3 million. Colorado statue prohibits deficit fund balances, so these deficits have to be cured to come into compliance with the state.
The proposed recovery program will be a three step process: First, the deficit in the fleet fund will be zeroed by allocating money from five other funds based on the historic percentage of fleet use from those fund areas. Next, the deficit in the nutrition fund will be zeroed by allocating money from the general fund. Finally, the deficits in the remaining funds (airport, human services and capital improvement – and the new deficit created in road and bridge by its allocation into the fleet fund) will be zeroed by a loan from the Road Capital Improvement (RCI) fund.
Schulte was careful to say that the money from RCI is not a transfer — the process that appears to have created some of the accounting mess to begin with — but rather a loan, and that County Attorney Teresa Williams has verified that the County has the authority to do an Interfund loan. The proposed terms of the loan will require a 20 year repayment period at 3% interest with the first payment to begin in June 2009. Each of the four funds receiving the loan will allocate a proportional annual repayment amount as a budgeted item. The total annual debt service on the loan will be $197,956.
Since the Road Capital Improvement fund does not generate revenue (it’s a pass though fund where allocated revenues match capital expenditures) and the airport fund typically runs in the red, the debt service for these funds will, according to Schulte, come from the general fund. That will most likely be the case for the human services fund as well. The road and bridge fund has its own revenue stream and will likely be able to cover its debt service.
Responding to a question from the audience, Commissioner Zaday affirmed that the loan from the RCI fund will not involve money allocated for road capital improvement projects for 2008. Likewise, Finance Director Warn confirmed that the $3 million loan from the RCI fund involves verified funds — real dollars in the bank — and not the mere shuffling of paper assets.
The Interfund loan proposal will be formally presented to the Commissioners for consideration at their May 6 meeting.
The County has also issued a request for proposal for a computer system, to be purchased and installed with matching funds from the state, that will help bring accounting practices into the 21st century. According to Richard Lindblad of the financial task force, the system will allow the County to insure that Treasurer’s Office financials are tracking with Finance Department information — something that has not happened before in the County, apparently.
To echo the sentiments expressed earlier, Schulte and the County administration are to be commended for engaging in a relatively transparent discussion of County finances. Because of the frank nature of the discussion it also became apparent that, despite the guarded financial optimism, the mood within County departments may be less than upbeat. Several department heads cited low morale among their staff, a consequence of cut-backs and work loads — and perhaps a sense of future uncertainty.
There are many of us in the community that can empathize with that sense of uncertainty. It is heartening to realize, however, when reflecting on the County’s financial meltdown that surfaced just a year ago, that there may be daylight at the end of the dark tunnel — and not the oncoming train wreck that some feared was inevitable. |
|
|
|
|
|
| |
|