PITKIN TRUSTEES HOLD A BUDGET ANALYSIS WORKSHOP
TO CONSIDER FUTURE REVENUE NEEDS
On the heels of the April election which saw a 6.5 mil property tax increase proposal defeated by local residents the Town Council held a work session on May 23 to hear a report from the Colorado Department of Local Affairs (DOLA)
and begin discussion of ways in which Pitkin can sustain its annual operating budget. Last year Mayor Rachel New contacted DOLA for assistance when a Gunnison County decision to curtail snow removal services to Pitkin signaled
that a major expense would stress the Town’s budget capabilities.
Kimberly Bullen and Parker Crowe with DOLA presented a report entitled “Financial Conditions Town of Pitkin”. DOLA provides technical assistance to communities statewide to assist them in improving financial management practices
through budget review and development of budget policies.
The financial condition report presented at the May 23 work session reviewed data for the past 10 years and shows that Pitkin’s population has remained fairly stable as have the town’s property values and property taxes, due in
part to the Colorado Taxpayer’s Bill of Rights (TABOR). Several graphs were presented which show that the town’s unrestricted fund balance has remained fairly stable as have revenues and expenditures. Annual budget revenues
typically come from property taxes, sales taxes, and fees. The report indicates that 47% of the town’s 2016 budget revenue came from sales tax while only 26% came from property taxes. DOLA noted that sales tax revenues, which
in Pitkin come primarily from tourism related businesses, can be volatile depending on regional and national economic conditions. While property tax revenues have remained relatively stable there is the likelihood that those
revenues will be reduced over time as a result of what is known as the Gallagher Amendment. That amendment provides that 45% of property tax revenue is to come from residential property and 55% is to come from commercial property.
Past trends indicate that statewide residential property values are increasing and because of the Gallagher Amendment the residential assessment rate will be decreased to maintain the required tax balance. This will result
in a reduction of property tax revenues to Pitkin. DOLA noted that the impacts of the Gallagher Amendment are particularly challenging for smaller towns.
While revenue and expenditures have been fairly stable since 2009, the data presented by DOLA indicates that in 2017 and 2018 the town’s expenses have increased in direct relationship to the change in snow removal costs. This increase
has had an impact on the unrestricted fund balance. DOLA recommends that Pitkin develop a reserve fund policy to determine the appropriate amount of the unrestricted fund balance to be held in reserve and to regulate how reserve
funds may used and how to replace the funds used. The reserve fund should anticipate potential one-time expenses facing the town, such as bridge repairs, as well as providing for emergency operation funds to maintain town budget
operations for a stated period, such as six months or a year. Because snow removal is an ongoing expense the reserve policy would require that Pitkin develop a revenue stream capable of funding expenses without the need to
rely on reserve funds.
After hearing the DOLA report the Town Council discussed several steps that can be taken to prepare the Town for dealing with increased snow removal costs and development of a viable budget process for future years. Town Council
members indentified the following issues to be addressed to assist in the preparation of the 2019 budget:
*Adopt a Reserve policy
*Determine anticipated snow removal costs
*Hold workshop sessions to develop proposals for increasing revenues for the annual budget
*Research possible local fees on tourism, such as a local OHV permit (DOLA will research this as there may be some limitations in State law regarding local permits)
In summary, the DOLA report, which will be posted on the Town’s website, shows that while things have remained fairly stable in Pitkin the challenge of funding snow removal costs will impact the unrestricted fund balance (currently
projected to be around $170,000 by the end of 2018) and will also require identifications of ways in which other expenses can be managed and/or revenues can be increased. Mayor New stressed that the Town Council needs to accept
the budget challenges facing Pitkin and indicated that work sessions will be scheduled in the near future so work can begin on addressing those challenges. DOLA will provide additional background information to assist with
upcoming work sessions.
You may listen to the audio recording of this meeting by following this Link.