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County budget: 2010 better than expected

April 26, 2011

Whether the local economy is recovering from the recession is up for debate, given the national debt, high unemployment and rising gas prices. 

El Paso County officials aren’t taking any chances. The board of county commissioners said Tuesday they’re preparing for the worst and hoping for the best.

There’s no doubt a financially difficult 2012 lies ahead, but dire five-year budget projections forecast last fall now don’t look as bad, budget officer Nicola Sapp said at Tuesday’s regular meeting.

Through 2015, the county should be able to cover revenue losses from declines in property tax collections and interest on investments with cash reserves. The county finished 2010 with a cash balance of nearly $19 million, she said. 

“We’re trying to protect our core services and not have future budget reductions,” Sapp said. “We’re not just flying by the seat of our pants, here, which we haven’t done for a long time.”

A few years ago, the recession hit hard. The county government’s cash reserves hovered near rock bottom, 200 jobs were eliminated through layoffs and attrition, and programs got axed.

To avoid a replay, Sapp said the county has taken deliberate measures to cut expenses, restrict purchases, streamline operations, budget conservatively and build a stockpile of operating reserves.

“We’ve been adjusting and preparing for what we know is coming,” she said.
What’s coming: Residential and commercial property tax revenues for the county are predicted to drop from $28.6 million this year to $24.9 million in 2012 and not recover until after 2015.

Why? County Assessor Mark Lowderman thinks the local commercial real estate market has not bottomed out, meaning depressed property values will continue for several years. Property taxes are the second-largest revenue source for the county, next to sales and use taxes.

Last fall, as the county was creating its 2011 budget, Sapp anticipated an unrestricted operating budget deficit of $16.5 million by 2015. That’s now been adjusted to $4.5 million for 2015, due to the cost-savings and hope that sales and use tax collections and other revenue will increase.

Still, next year’s budget deficit is projected at $8.6 million, compared with this year’s deficit projection of $3.4 million. If the worst-case budget shortfall scenario plays out over the next five years, the county would nearly deplete its cash reserves in 2015.

Sapp doesn’t think that will happen, though, because the projections are conservative estimates, based on 1.52 percent growth in sales and use taxes. Since being caught off guard by the economic downturn a few years ago, Sapp said the county now errs on the side of caution.

That’s what happened last year, she said Tuesday, in summarizing final budget figures for 2010.

The county brought in $6.2 million more revenue last year than projected, Sapp said, largely because sales and use taxes were $4.3 million more than projected when the budget was created last fall.

“This is not poor budgeting, but our savings strategy,” Sapp said.
County sales and use tax collections were up 5 percent in 2010 over 2009, she said, adding that’s in line with the city of Colorado Springs, which saw a 5.9 percent increase in sales and use taxes collections last year over the previous year. Still, the numbers haven’t recovered to pre-recession levels of 2007.

“What we don’t know is whether this indicates a recovery or whether it’s just normal growth,” she said.

Sapp will present an updated five-year forecast in July, based on revenue from the first half of this year.

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