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Ignacio facing tough budget decisions
11/16/2012 By: Carole McWilliams
Town of Ignacio financial balances aren’t what officials have thought for the past several years, and the water and sewer systems are losing money.
That was the dismal and complicated news on Nov. 13 to unhappy town trustees and a room full of unhappy community members.
Town financial reserves are $550,000 less than officials have thought for several years.
Finance Director Lisa Rea, who has only been in the job for a couple months, said, “That isn’t money we have to find and pay someone. It was fund balances that were listed incorrectly. Nothing is changed.”
“The beginning balances were misleading,” Town Manager Mike Lee said. “They included capital assets. We need to adjust those.”
He also said, “Putting the (draft 2013) budget together, we discovered that in 2006, when they were working on the 2007 budget, they took figures from the audit that showed the gas fund balance that included capital equipment, and that went in the 2007 budget. It’s been carried forward and gave the impression that there was a half million dollars more in the gas fund than there actually was.”
Discounting that leaves the $400,000 as the beginning fund balance for 2013, he said. “Write it (the $550,000) as a bad debt. It doesn’t change the money we have in the bank.”
Lee said of financial reserves, “You take into account all the funds, it’s pretty much staying even. We aren’t falling off a cliff. We won’t crash and burn, at least in the next year.”
But Mayor Ena Millich responded, “I think we’ll be bankrupt in less than two years if we don’t do something. … I thought we had $710,000 in the bank.”
That wasn’t the only budget discrepancy discussed on Nov. 13.
Lee said that out of the actual reserves of around $400,000, the water fund needs around $100,000, and an economic development fund loan payment of $105,000 will bring the reserves down to around $150,000 to $200,000.
The economic development fund was created to deal with the Rock Creek property west of Candelaria Heights that the town bought about 10 years ago with a $450,000 state grant and a $105,000 lease purchase deal, with intention to develop it for affordable housing.
The town sold 54 acres of that to the Growth Fund in 2011 for $365,000, and still has 5.6 acres north of Jake Candelaria’s house that it is preparing for affordable housing development to satisfy conditions of the grant.
Lee said the $105,000 was paid back, but out of the wrong pool of money - the $365,000, which is supposed to be used to get infrastructure to the 5.6 acres so it can be developed. That pool of money has to be paid back. “It’s not money that’s stolen or lost,” he said.
Water and sewer operating losses are the other big issue. Debt payments contribute to those losses.
The draft 2013 budget shows a loss of $75,775 in the water fund and $31,500 in the sewer fund.
Lee said, “The good news is our sales tax revenues have been going up. … Sales tax has gone up about enough to cover that. But they (water and sewer) need to be enterprise (self-supporting) funds.” That limits transfers from other funds to a maximum 10 percent of the water and sewer revenues.
The town already has some of the highest sewer rates in the state, Lee said, around $60 per month because of rate increases from the tribe.
The town buys treated water from the tribe and pays the tribe to treat town sewage.
Millich said she gets complaints all the time about the high sewer rates.
Lee said the water rates are more average compared to other communities, so there’s more room to raise those rates than there is with sewer.
The sewer system has a USDA loan to pay, inherited from the defunct Ignacio Sanitation District, and the water fund has a loan from the state.
Millich objected, “People were promised (when the town took over the sewer system) no raised fees. We never should have taken that on. We can’t go backwards, but we have to find a way to get out of it. This isn’t working.”
Lee said, “We’ve talked about refinancing debt. The state won’t do that. They could extend the term. We could consider refinancing through a bank or investor, but they probably won’t do that when there’s an operating loss.”
Lee said that the $31,500 sewer operating deficit in the 2013 draft budget includes a debt payment of $21,600.
As for water and sewer monthly rates, he said, “All we are doing is passing on the increased charges from the tribe. That doesn’t cover other increased costs.”
Trustee Linda Moore noted that dissolution of the sanitation district, which voters approved several years ago, has never been formally recorded.
Lee said, “We also haven’t received any ownership papers for the system, so we’ve been paying debt on something we don’t own.”
Town attorney Dirk Nelson said, “The full assumption of sewer bonds isn’t done yet.” Those are through the USDA.
Lee presented a list of eight options to deal with these: raise sewer and especially water rates; stop lowering gas rates when the town’s supply price goes down as a way to increase gas fund reserves; grants (not loans) from the gas fund once those reserves are built up, or from the general fund, to the water and sewer funds, but less than 10 percent of each funds’ revenues to stay within TABOR restrictions for enterprise funds; lower salary allocations made to the water and sewer funds; refinance debts if lower interest rates are available; continue working with the tribe and the Growth Fund to lower future rate increases and maybe lower current rates; continue looking for ways to lower water and sewer fund costs.
The Ignacio Town Board will have a special meeting on Tuesday, Nov. 27, at 6 p.m. at town hall to discuss a proposal from Brainstorm Internet to put an 80-foot-tall telecom tower on the town shop land on Candelaria Heights, and then to discuss ways to deal with the various budget shortfalls presented at the Nov. 13 board meeting.