Natural gas slump means difficult budget decisions in Garfield County
Facing a nearly $17 million decrease in property tax revenues in the coming year largely due to the downturn in natural gas production, Garfield County commissioners will have to decide in the coming month how to make up the discrepancy.
That reality is far from a surprise for the county, which depends on taxes — largely property taxes tied to oil and gas production — for more than half of its revenue. The decline in new drilling and price plummet of natural gas over the past 22 months has been well documented.
For governments and districts that depend on the natural resource extraction industry, the upcoming tough decisions have loomed on the horizon for some time.
However, it is far from doomsday for Garfield County, which had amassed a total fund balance, or reserve dollars, of $128.6 million in 2015, according to budget documents. As Ann Driggers, county finance director, explained at a Garfield County Energy Advisory Board meeting in early September, most governments hope to have a total fund balance equal to 30 percent of their operating budget. Garfield County’s reserves are at 110 percent of its operating budget.
Still, that “significant” drop, as Driggers called it at the meeting, from approximately $47.1 million to $30.2 million is nothing to scoff at.
A copy of the proposed 2017 budget will be made available after it is presented to county commissioners during a workshop Tuesday. Commissioner Tom Jankovsky, who served on the budget committee responsible for drafting the budget, said the proposed solutions for the discrepancy will come from several sources.
Around $10 million in one-time capital expenditures budgeted for 2016 will help make up the bulk of the $17 million revenue difference.
Another $1.6 million from mineral royalties under county roads will help offset some of the remaining difference.
However, that “shot in the arm,” as Jankovsky referred to it, is largely one-time money, with future payments shrinking to about a third of this year’s amount.
The county expects to see savings in its human services department, and the proposed budget calls for a $4 million cut to the road and bridge department — mostly in delaying or canceling asphalt projects, Jankovsky said.
Budget cutbacks also are happening across the department level, with each department being instructed to reduce their budgets in order to offset 2.5-percent merit pay increases and an expected increase in health-care benefit costs of 6 percent. Despite those increases, every department, including every elected official with the exception of the sheriff’s office, came in with a budget equal to or less than last year’s, according to Jankovsky.
The county also is seeing an increase of roughly $400,000 in returns on county investments through the treasurer’s office.
Mill levy adjustment
One of the more controversial budget decisions concerns the county’s mill levy.
The proposed budget calls for shifting the current 1.5 mill levy for road and bridge — where revenue is restricted under state legislation and where the county already has a healthy fund balance in the neighborhood of $31 million — to the general fund in order to free up those dollars.
The county is able to shift what percentage of its overall mill of 13.655 is allocated to certain funds. When a percentage of the county’s mill is allocated to road and bridge, a portion of that money must be allocated to and divided among the municipalities. Shifting the mill to the general fund will keep that money, which is expected to be around $400,000, with the county.
While it’s common for the county to adjust its mills (last year the county changed its road and bridge mill, to the surprise of many municipalities that only recently learned of the change, from 3.5 to 1.5), news of the proposal to strike the road and bridge allocation all together is already worrying some local governments that depend on that money for street maintenance.
Although any actual decisions have not yet been made, the town of Parachute, which received $50,000 in 2015, already is anticipating receiving nothing in 2017, according to a memo from the town manager to town trustees.
The “bad news,” as it’s been labeled, was a topic of discussion at the Carbondale Board of Trustees meeting in September. The town had predicted receiving $175,000 in 2016, however, that projection was without the knowledge of last year’s adjustment in the road and bridge mill levy, Jay Harrington, town manager, said at the meeting. The prediction for this year is now around $94,000. Harrington suggested trustees stress the importance of the money to commissioners.
Rifle city officials did just that during a joint meeting between City Council and the commissioners in late September. Much like Carbondale, Rifle, which received $168,684 in 2015, formed its predictions for 2016 without knowledge of last year’s adjustment to the mill levy. The city now expects to receive $90,000 — half of the $180,000 it budgeted.
Rifle uses the money for basic street operations, such as snow plowing, and although the dollar amount might not seem that much to the county, it’s a substantial amount for the city, Rifle officials said at the meeting.
Response from the commissioners was somewhat mixed, with Jankovsky sticking with the proposal and the other two offering more flexibility, albeit with not much detail.
“We have to weigh that and see what we can do to assist you in one way or another,” Commissioner John Martin said at the meeting.
The mill levy matter is sure to be a topic of discussion among commissioners during the string of budget-focused meetings this month. Although the county is in a solid place financially, the volatility and uncertainty in the natural gas sector means the county needs to tighten its belt, Jankovky said. The county is prepared to weather the storm for the next three to five years, but if natural gas prices drop or continue to remain low and production stagnates, it could mean more drastic cuts and potentially a reduction in services.
“We have to be prudent in how we spend our money and that message has to get out to the municipalities who have been use to coming to us and asking for money when they have a need,” Jankovsky said.
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