Tuesday, October 15, 2019

CB council looking at tough budget calls for 2019

An “eat your vegetables” type of budget

By Mark Reaman

As town financial reserves continue to take a hit, the Crested Butte senior staff hopes the council pumps the brakes a bit with next year’s budget. A 2019 budget that is spending more than it takes in has the Crested Butte Town Council having to make some tough decisions. A projected deficit of $229,000 motivated the staff to suggest ways to balance the annual budget but the final decision on how to do that, or even if it is necessary given still healthy but declining fund balances, is up to the Town Council.

The council will consider questions next Monday on how to proceed with a proposed Big Mine Ice Rink/Nordic Center Warming House expansion; whether to contribute to road work improvements near the Crested Butte Community School; how much to set aside for so-called “green” or sustainable projects; how to adjust the legal department so an in-house attorney could be used as opposed to the monthly retainer for the current town attorneys based in Boulder; determine how much to cut back on the community grants that go to local non-profits; and if the staff should look at charging a higher rate for park rentals (for events like weddings) to out-of-valley residents versus locals.

The council held a three-hour work session on Monday, October 29 to begin the broad discussion of budget reality. Town finance director Rob Zillioux led the discussion, stating the town staff was “striving for a balanced budget where year-end revenues matched expenditures. The staff is proposing an ‘eat your vegetables’ type of budget to stay healthy into the future.”

Zillioux said several factors had him concerned on both the macro and the micro economic levels. That the town’s revenues were generated primarily through tourism and sales tax concerns him, especially if the country were to encounter a recession. He pointed out a recession was probably due soon, considering the typical cyclical nature in which an economic downturn should be expected every 10 to 12 years.

“After a drop, it typically takes Crested Butte about five years to get the sales tax base where it was before a recession,” Zillioux said. On the micro level, he pointed out that many locals shop online or go to Gunnison for groceries, which takes away potential sales tax revenue from town. But he noted Crested Butte still provides many of the upper valley public services, especially for things such as parks and recreation.

“Year-to-date the town is up about 3 percent in sales tax over last year but both August and September fell off compared to earlier in the summer,” Zillioux said. “We’re behind in maintenance on our existing infrastructure. But we have been spending a lot more than we are bringing in.”

As an example, the council agreed earlier this year to focus on affordable housing projects and has allocated $2.3 million on the effort. Some of that money will be returned through sales of deed-restricted units. Several one-time expenditures, such as a $350,000 payment to Cypress Equities as part of the Aperture annexation land exchange and old dump cleanup north of town and the Pirate Park construction for about $100,000 in town funds (plus a $350,000 grant) are budgeted for 2019.

Zillioux said for the first time in several years, the 2019 general fund reserves are expected to dip below the town’s goal of having one year of operating funds on hand. He told the council that as the town adds new facilities, the operating costs increase every year and big projects such as the Center for the Arts expansion inevitably result in higher ongoing costs or unexpected expenses for the town. And then there is the current situation where rent paid by organizations, most of them local non-profits, for town-owned space doesn’t come close to covering basic costs of the space.

Proposed staff solutions to increase revenue and cut expenses include cutting community grants in half; tabling any effort to turn Avalanche Park south of Crested Butte into a campground; putting off the painting of the Stepping Stones building; and postponing other maintenance projects including resurfacing the Rainbow Park Playground.

Zillioux estimates sales tax will increase a nominal 1.5 percent in 2019, and the real estate transfer tax (RETT) will be flat and will be split between open space and affordable housing projects. The staff is suggesting to not increase the town mill levy at this time but implement slight increases in fees such as those for  park and recreation and BOZAR (Board of Zoning and Architectural Review). No new staff (including an eighth marshal’s position that was requested) will be added, the town’s bank account will be shifted to a higher interest rate account, and staff will generally receive a 4 percent raise.

“I think you are being overly pessimistic,” noted mayor Jim Schmidt to Zillouix.

“I think he is being realistic,” countered councilman Paul Merck.

The general fund is projected to pull in $4.8 million and end with a $111,000 surplus. After some initial trimming by staff, the overall $14 million budget is estimated to have a deficit of about $229,000 next year. But the trend is downward and, for example, the capital budget that has a current fund balance of $2.5 million would be in the red by $1 million by 2023 if town spending continues at the same pace as the last few years.

The idea of reducing community grants from the budgeted $105,000 to about $50,000 didn’t go over well with council.

“I think that would be hard,” said Schmidt. “As much as we try to wean people off the grants, a certain amount take funding. Think about things like the Crested Butte Conservation Corps, which is very effective.”

One of the longest discussions on Monday was whether to continue contributing $6,000 to the One Valley Prosperity Project. Schmidt said he was not a fan of the expenditure or the program and felt given the choices in front of them, it would be a place to cut back. The rest of the council argued that it was a small price to pay for showing good will with the county.

“The cost-benefit is probably worth keeping it,” suggested councilwoman Laura Mitchell.

“The communication up and down the valley is as good as it has ever been,” added councilman Paul Merck. “Let’s continue with the positive steps. We need to be at the table.”

When the council started looking at potential questions posed to them by the staff on how to balance the budget, they didn’t provide many answers.

A long discussion on whether the town should proceed with the proposed Big Mine Ice Rink/Nordic Center Warming House expansion ended with the council wanting to make sure the town wasn’t going to be on the hook for long-term increases in operational and maintenance costs of the expanded facilities. Even though no final decision was made, the council members indicated they were willing to pony up $250,000 in cash (with $167,000 still available from the Whatever USA payoff) and $250,000 in in-kind contributions to help make the expansion happen. But council wanted to be clear before any commitment that the Nordic and hockey communities would be responsible for future annual costs beyond what the town currently pays.

“The town doesn’t need to take on any more operating costs than it already provides,” said councilman Chris Haver.

“The bottom line is that something has to give if we keep funding affordable housing as we have,” noted Zillioux. “The budget gets negative pretty fast with big projects like affordable housing and the Big Mine project.”

“By virtue of what we’ve done so far I feel like we’ve committed to [the Big Mine] project to some degree,” said Schmidt. “But if the council doesn’t feel it can operate it down the road, we shouldn’t continue with it.”

Town manager Dara MacDonald said the council had not voted to make any official commitment to funding the project.

“The further we go down the road, the harder it is to stop, but we need realistic numbers,” said Haver.

Zillioux suggested requesting a detailed pro forma to see where the finances would settle in the future.

The council started discussing if they could contribute to future street and road work being contemplated by the Crested Butte Community School, but after three hours of numbers contemplation, they decided it would be best to continue the discussion at a future work session. That work session will take place Monday, November 5 at 5:30 p.m. before the regular council meeting.

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