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The Town budget |
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Thursday, 28 February 2008 |
By Wendy Sugimura
Mayor Pro Tem
I tried coming up with a snappy, cute title, but eventually decided to just call it like it is, especially since that’s the purpose of this article. A lot has been said about the Town budget over the past couple of weeks, and my intent is to add perspective and ensure accurate information in the community discussion.
I believe that in times of financial stress, the most responsible course of action is one that is methodical, thoughtful and deliberate. Town Council has taken such actions recently to minimize the budget deficits, and we will continue to scrutinize the situation and take appropriate action. We have delayed $31 million in capital improvement projects to modify the DIF budget, and we are holding most vacant staff positions open to save money in the General Fund. Are more actions needed? Possibly. Some practical suggestions have been made at our meetings, and we will continue to review the situation in a thoughtful and deliberate manner. Meanwhile, how did we get here?
We have two separate budgets in question. The first is the Development Impact Fee (DIF) Fund, which is used only for capital improvement projects. The DIF budget does not fund general Town operations; that is the realm of the General Fund.
Budgets are always based on an informed set of assumptions: how much revenue might come in versus the amount of foreseeable expenditures. In the current budgets, we assumed that one of three major development projects would likely break ground: either the “1” Hotel, Eagle Lodge or the Ritz-Carlton. Although we were expecting a slowdown in the development economy, Starwood representatives were adamant the “1” would move forward, an expectation reinforced by the amount of international media hype. The zoning code amendment for Eagle Lodge had been granted and the ski area was pushing strongly for a spring ’08 groundbreaking. Finally, the Ritz-Carlton is still on track to break ground in the spring or summer and just pulled their grading permit, but given current economic uncertainties, we are preparing for the possibility they may delay construction. So, while the assumption may turn out to be wrong, I don’t believe it was unreasonable. Of course, if the the Ritz-Carlton does break ground, the budget “problem” will disappear!
The impacts of no major project breaking ground are reduced Building Permit Fee revenues, which fund the General Fund, and reduced Development Impact Fee revenues. In addition, the General Fund is absorbing unexpected litigation costs of about $500,000 pending resolution of insurance coverage issues. The adjuster’s initial denial of coverage was unexpected, and we are appealing the decision as the basis appears to be weak.
Where does all this leave us? In the DIF Fund, Council’s action to delay capital improvement projects reduced the deficit to $1.2 million. While it may sound like a lot, the DIF account can carry this shortage with no significant adverse impacts. The delayed capital improvement projects are important to our community, but one of the consequences of tying funding to the development cycle is that when the development economy slows down, so do the funded projects. We may need to have a discussion in the future about other funding mechanisms for these very important projects, but that still lies ahead of us.
In the General Fund, the reduced permit fees (-$1.5 million) and litigation (-$500,000) combined with an unexpected increase in property tax revenues (+$600,000) leaves us with a $1.4 million shortfall. This amount will be further offset by savings from unfilled staff positions of about $225,000, resulting in a worst case scenario of about $1.2 million. Other revenue sources could still come in over budget or the Ritz-Carlton could break ground, but we just don’t know, yet. While the worst case scenario is definitely a challenge, past Councils had the foresight to set aside money in a Reserve for Economic Uncertainty (REU) for difficult times exactly like this one.
The REU is funded at $4.4 million, or 25 percent of the General Fund. It was created to ensure the Town could weather economic downturns without having to drastically cut community service levels for at least three years. While balancing the budget is always preferable to using one’s savings account, we do have the ability, given our current situation, to avoid drastic actions that may reduce community service levels and damage the integrity of our organization. The REU will be paid back in the future through savings from open staff positions, building permit fees if major projects currently in the application phase are approved and pull permits, and modifications to future budgets that result in savings.
Where do we go from here? Development of the 2008-2009 fiscal year and 5-year budgets this spring through a transparent, open public process will be critical. The forecasting methodology has proven over the years to be accurate and conservative, but questions have been raised about this methodology and other information used to develop the budget. All of it needs to be open for public discussion and education, and informed by the expert knowledge of our staff and past consultants. We need to take into account that this economy is unique, and adjust accordingly.
The Town Council fully accepts responsibility for the state of the budget, including the fact that we are strongly positioned to handle the deficits while retaining the levels of service the community expects from us. Be assured that we are prepared to answer the tough questions and make the difficult decisions demanded by a continued downturn in the economy, but we will continue to do so in a patient, methodical and deliberate way.
If anyone has further questions about the budget or specific numbers, or has other concerns, please don’t hesitate to contact me. The best way to reach me is via e-mail at
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"Mammoth Forum" is a forum for public representatives to express opinions. Length limit: 1,000 words. Original ideas receive priority over responses to previous columns. The views expressed are those of the author and do not necessarily represent policies and opinions of the staff or owners of the Mammoth Times. Reader response is encouraged. –MT
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Last Updated ( Thursday, 06 March 2008 )
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