Vail Valley Voices: State of Eagle ﬁnances is no scare tactic
May 19, 2012
The debate about Eagle River Station has raised questions about Eagle’s financial health. How is our town really doing?
Our approach to gathering facts: Several Eagle residents with business and financial experience analyzed the town’s budgets from 2007 to 2012 and reviewed the audited financial statements for 2009 and 2010. And we met with town officials to clarify how the town conducts business.
It is important to note the pro-ERS forces are not waging scare tactics with the town’s financial situation. Many of the grassroots members have seasoned business experience, a few having operated their own companies and several have managed municipal financial affairs.
The objective has been to focus on reality, to identify Eagle’s financial situation and ensure the community’s economic stability.
Town debt: As differentiated from Eagle’s general fund, the town is required by law to account separately for enterprise funds (Eagle’s proprietary funds, which include the water fund, wastewater fund and refuse fund). Additionally, the special revenue funds, which include the conservation trust fund and the open space preservation fund, are legally restricted.
The town currently has a financial debt projected for Dec. 31 of $15,280,417 associated with water, wastewater and refuse.
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Current revenues from usage fees, etc., are utilized to offset operating costs and debt service for these entities. These funds reimburse the town’s general fund for administrative costs associated with managing the enterprise entities totaling $120,000 annually.
The town has two more debt payments besides the enterprise debt obligations, totaling an additional $250,000.
General fund, operating the town: The alarming intermediate-term issue associated with the town’s financial health is general fund revenues have been declining dramatically since 2007. For example, general fund revenues in 2007 were $7,709,000 and have declined to approximately $5,500,000.
The town may not go out of business today. However, operating costs are projected to exceed revenues this year. If this continues, as it has for the past three years, it would be cause for serious concern.
Most other mountain towns with significant retail bases have seen their revenues grow during recent times, primarily because a major portion of their community revenues are generated by sales tax.
Per the 2012 town budget, the town is projected to operate at a deficit this year. Simply consider the $717,320 general fund surplus beginning balance on Jan. 1 and subtract the projected ending balance on Dec. 31, and you will conclude, as we have, that the town is anticipating a little more than a $250,000 operating loss for 2012.
To balance our budget, the town will be required to utilize about one-third of our emergency-contingency reserves.
Capital improvements fund: The current balance of the capital improvements fund is misleading. It appears that the town has plenty of cash for current and future capital improvements and other related projects. However, the Eby Creek Road improvements, planned for the near future, are subject to the town matching the $3,000,000 Colorado Department of Transportation funding and must not be committed elsewhere.
This leaves the town with uncommitted capital improvements reserves of less than $500,000.
These reserves are insufficient for a town the size of Eagle, especially considering future capital improvements the town will need in future years, not to mention the potential deferred maintenance the community could face, considering constrained budgets.
For perspective: The Eagle Ranch Association, with far less infrastructure, has approximately $1,000,000 in its uncommitted capital improvement fund.
Projected increase in sales tax revenues in 2012: The projected net increase in sales tax revenues for 2012 will not cover the projected operating deficit for the town this year. The town will be required to fund the deficit from reserves.
Attack on raises is insensitive to valued town employees: Town employees have seen the size of their staff shrink by 20 percent. It’s been almost four years since their last payroll adjustment. All are doing more, for less, with constrained budgets.
The adjustment amounts to less than 1 percent annually since their last raise, an amount dramatically less than cost-of-living increases.
Even during these challenging economic times, the compensation of these employees needs to keep pace with wages offered by other municipalities.
Effect of continued town operating deficits: It’s no secret that municipalities and state governments are facing similar financial challenges throughout America.
If the town of Eagle continues to incur operating deficits and to deplete its capital fund, as well as its emergency and contingency reserves, no matter how anyone spins it, the community will be required to consider more drastic revenue increases and/or cost-cutting measures.
The result of reduced budgets will be increased deferred maintenance to our streets and other community infrastructure.
Summary: Since the last mayoral and trustee election April 3, there have been three Town Board meetings. There have been no new proposals offered to generate new revenue for the town. During the past two years, the anti-ERS group hasn’t offered any substantive and realistic revenue-generating proposals.
The fact is that Eagle needs new sources of funds. A common misunderstanding is that property taxes are a major source.
Unfortunately, Eagle only realizes a small percentage of these revenues from property tax.
As in the case of many mountain towns, most of Eagle’s revenue comes from sale taxes. Retail businesses generate the vast majority of funds necessary to operate our community.
One of the complications during the past 10 years is that the town population has more than doubled. But, compared to communities nearby, our retail growth has faltered.
For example, Glenwood Springs’ population is almost 50 percent larger than Eagle but has more than six times the sales tax revenue.
We simply need more retail to achieve financial stability.
We believe that Eagle River Station has the potential to provide the town with a fresh and diverse group of retailers, many of which would represent national brands.
There are no absolute guarantees that Eagle River Station will be a success. However, the developer has an excellent track record, is well-financed and has developed successful shopping environments in 12 states, composed of more than 17 million square feet of retail space. Most importantly, the town virtually has no risk.
Why not give this opportunity a chance? It’s the best solution that has been presented to the town in years. We need to approve ERS and move forward. Eagle River Station has the potential to stabilize the town’s financial health and protect our future.
Jim Ash is an Eagle resident.