Funds spark doubt |

Funds spark doubt

Residents question county budget surpluses

Susan Cunningham

When Routt County Finance Director Dan Strnad started his job in 1988, the county sent him to a class in Vail and gave him a county car to get there.

The car was a piece of junk that was frightening to drive, Strnad said.

At the time, the county had only $40,000 in its general fund, with not much left anywhere else, Strnad said.

It had just built a new jail, extended the runway at the Yampa Valley Regional Airport and had used up all of its heavy machinery in the process. There was no plan to pay for replacements — people had to fight to get anything purchased.

“I was sitting there thinking, ‘What did I get myself into?'” he said.

County commissioners, at the time, decided there had to be a better system, and they settled on pay-as-you-go funding, a way to set aside funds annually during a piece of equipment’s life so that cash is available when it needs to be replaced.

For instance, if a $200,000 road grader lasts 20 years, the county would set aside $10,000 a year and be ready to buy a new one when it dies.

The other alternative is to borrow money, which could be more expensive, depending on interest rates, Strnad said. Although a county has to get public approval for taking out debt, other methods, such as issuing certificates of participation, are possible.

At the end of 2003, the county had about $21 million in reserves, mostly because of the pay-as-you-go policy of setting funds aside, and some from yearly surpluses in the county’s operating budget.

To some residents, that is too much money sitting in the bank.

When resident Fred Wolf looked at that number, along with the fact that in 2003, the county was carrying only $230,000 of debt and was operating with a $1.8 million surplus, he questioned publicly whether the county was not spending enough or it was collecting too much tax revenue.

The two views

To Wolf, who has expressed his concerns repeatedly at county budget hearings for the past few years, taxpayers’ dollars should be spent so that those who are paying for services benefit from them.

“Why should you pay for a road grader that they’re going to buy 15 years from now?” Wolf said.

If the county pays for its justice center completely with funds from reserves, it would mean that taxpayers in the past decade or so are paying for a building that will be used by future generations who do not have to pay a penny, Wolf said.

Although he does not mind a conservative approach to budgeting, Routt County’s policy is too conservative, he said.

“My problem with the county is they have too many assets, too much … just sitting there,” Wolf said. “They’re not spending the money that comes in and, on top of that, there’s no debt.”

The county’s financial picture should change in the near future, though. It plans to use $7 million from reserves and $8.8 million in debt to build a new justice center, as well as $2.5 million to remodel the historic courthouse.

Routt County Commissioner Nancy Stahoviak stands firmly by the county’s budgeting practices, saying they show responsible fiscal planning.

Without planning for the future, counties can get into too much debt and find that they’re unable to pay for the necessary level of service.

Stahoviak, who serves on a statewide board that helps prioritize Energy and Mineral Impact Grant applications, said counties sometimes come to the state asking for grant money to help replace a piece of heavy equipment, a county vehicle or a sheriff’s vehicle.

The response from the committee is that planning for the replacement of equipment should be part of the governing bodies’ duties.

Stahoviak also has a different view of the justice center. Even with taking out some debt, new residents will be using the center long after it is paid off, she said.

“To me, you have to kind of look at the overall good for the community and what the benefit for the community as a whole is,” Stahoviak said.

And although Wolf may feel he’s paying for the next generation’s needs, if everything was paid using debt, the next generation could end up paying for his services, Stahoviak said.

Two philosophies

Geoff Withers’ third-grade teacher saved money so she could pay for every car she owned in cash.

Withers, a consultant who worked for the Department of Local Affairs for almost 25 years helping counties with budgets, never forgot how proud his teacher was of her money system.

That sort of approach to money is more intuitive and explains the pay-as-you-go system, he said.

Some government officials stay away from big debt payments because they worry that they may not be able to make those payments if revenues drop.

On the other hand, most money managers or financial experts say that it’s cheaper to borrow money, because you get something that would cost more in the future and have immediate use of it now, he said.

“That’s the tension,” Withers said. “I don’t know if there’s really a right answer or a wrong answer.”

Other counties

The first rule of county budgets is that no county is the same.

They all have different revenue sources, including industry, tourism and agriculture, as well as different expenses and different financial risks.

That goes for all governments across the nation, said John Fishbein, senior manager of technical services for the Government Finance Officers Association.

The group’s recommended policy is that local governments save 5 percent to 15 percent of their operating expenses, but those are flexible guidelines.

Rules state that counties must keep a minimum amount in reserves, but do not cap how large those reserves can grow.

It would be extreme for a government with a $10 million operating budget to save $100 million, Fishbein said, but the ultimate decision is left up to the government.

“It’s like the U.S. government — there’s no best deficit or best surplus,” Fishbein said.

A quick look at counties across Colorado shows there are varied approaches.

Grand County takes a conservative approach. Former finance director Denise Harvey, who left the county just last week, said the county likes to underbudget its revenues and overbudget its expenditures to keep risks low and build up reserves.

“But we know that we need to spend the money that (taxpayers) give us,” Harvey said. In a tight year, the county would cut back on how much it puts in reserves rather than cut back on providing services.

Eagle County likes to keep “a rainy day fund” or savings that will get the county through hard financial times, county Financial Director Mike Roeper said.

In a tight budget year, big-ticket items such as a $200,000 piece of heavy equipment become targets for cuts if funds are not set aside already, which is just what Summit County has seen recently, Finance Director Linda Gregory said.

Setting funds aside in the first place is something Summit County is considering, she said, because putting off needed replacements just compounds the problem.

In Boulder County, however, the sense is that although some savings are necessary, it also is necessary that taxpayers feel the benefit of their tax dollars, Budget Director Margaret Parish said.

“I have worked for commissioners that have felt that once the taxes have been paid by the citizens, that they should receive a service for it and that it should not be saved,” she said.

But that strategy does not work for everyone.

“In the final sense, it has to be sort of situational for each county,” Parish said. “It is a debate — there isn’t any easy answer for this, what fits one county doesn’t fit all.

“I’ve sat through hours of debate on this. It’s not a simple question.”

Comparing by numbers

A look at 2003 audited budget numbers for Routt, Pitkin, Summit, Grand, Eagle and La Plata counties is one way to compare a few small- to medium-sized counties in Western Colorado.

Strnad tallied each county’s unrestricted assets — the funds each county held in reserves for 2003.

Compared to expenses, Routt County’s $21 million in reserves is by far the highest among the counties studied. It represents 94 percent of the county’s expenses.

The other counties averaged reserves of 44 percent of expenses, with Grand County at a high 67 percent and La Plata County at a low 26 percent.

When Routt County spends some of its reserves to build the justice center and remodel the historic courthouse, its reserves would drop to about $12 million, which is about 50 percent of its expenses and is more in line with nearby counties.

Also interesting, Strnad said, is to compare each county’s 2003 surplus, or the difference between what the county collected in revenues and what it spent.

Routt County’s surplus of $1.8 million represents about 8 percent of its expenses. If the county were to use that money to fully fund replacement pools for bridges and paving, the surplus would be more or less wiped out, Strnad said.

In comparison, the other counties had an average of 26 percent of expenses in surplus. La Plata, for instance, had $12 million in surplus, and Summit County had $10.5 million.

Next step

For Wolf, the best solution is for the county to set up a group that studies the county’s budget closely and makes recommendations, similar to the city’s Tax Policy Advisory Board, on which Wolf serves.

“There’s enough question and enough lack of understanding that it would be worth having a group like the city did,” Wolf said.

Strnad said that there are options for how to manage government funds but Routt County has chosen pay-as-you-go funding.

“We’re spending it,” Strnad said about taxpayer dollars. “It’s not like we’re not spending it.”

— To reach Susan Cunningham, call 871-4203 or e-mail

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