Austere times ahead for Larimer County

By Dan MacArthur
North Forty News

Larimer County is hunkering down for tough times, pondering whether to stash reserves for dark days ahead or parcel them out prudently to preserve services.

The county general fund budget is expected to decline by slightly more than 2.1 percent to about $95.67 million in 2010, according to projections prepared by budget manager Bob Keister.

The general fund reflects the amount available from local taxes and fees to provide basic county services. It is about one-third of the total budget, which includes state, federal and other revenues earmarked for specific departments or programs.

The reasons for the fall should come as no surprise. Fewer vehicles are being bought and registered, resulting in an expected 10.5 percent reduction in specific ownership tax revenues from $7.6 million to $6.8 million.

With interest rates at rock bottom, interest income is projected to plummet by two-thirds from $2.4 million to $800,000.

And property taxes--the biggest source of county revenues - are expected to remain essentially the same, generating a tiny 0.75 percent increase to just over $72.7 million in the next budget year. County Assessor Steve Miller said he expects those revenues to remain flat for the foreseeable future as the housing market continues to recover.

The situation almost certainly means there will be reductions in some services and no pay raises for county employees.

The county commissioners on July 22 agreed on their recommended funding level for each county department using an elaborate process to identify budget priorities. County services were ranked by importance as determined by 47 top officials.

Amazingly, Keister wrote in a memo to the commissioners, there was consensus among the advisory group. The highest overall priority by far was operation of the county jail. It was followed by emergency preparedness and response, senior and disabled assistance, and law enforcement services.

The county surveyor was deep in the cellar, with economic development contributions and the fairgrounds and events center slightly more popular.

The big decision, Keister said, is whether the commissioners are willing to tap into the nearly $15.6 million in reserves accumulated over the last five years or lock it away to weather a potential storm. County manager Frank Lancaster said the commissioners generally opted for the conservative approach in their recommendations.

The county is headed for a big fall when the 0.2 percent sales tax financing jail expansion and operations expires in 2014. Another 0.2 percent sales tax to pay for construction of the justice center is set to expire in 2012.

Keister said the county already is tapping into the general fund to support the jail because sales tax revenues are insufficient to meet debt-service obligations. He said that subsidy is likely to continue until the jail tax expires, resulting in a $14 million annual funding gap unless a new or extended tax is approved by voters.

"This (reserve) has been built primarily to help us deal with that," Keister said. "The question is, can you replace it and is that the best use of the money?"

He cautioned that the county also could be forced to rely on the reserve for repairs to fairgrounds buildings damaged in a blizzard as well as possible damages payments to Timothy Masters.

Masters is suing Fort Collins police and Larimer County prosecutors, alleging that they violated his constitutional rights by fabricating a trumped-up case resulting in his conviction on charges of murdering Peggy Hetrick.

He spent 10 years in prison and was released in 2008 after a special prosecutor agreed that new genetic evidence warranted vacation of his conviction.

It's unclear what the county's exposure could be and how much Masters might seek. But both sides believe it could be considerable.

"What number could you possibly put on something like this," Masters' attorney David Lane told the Denver Post in October. "Fifty million (dollars), maybe? I don't know. It's unfathomable what Tim Masters went through."

Lancaster acknowledged that the county would be "financially on the hook" for any judgments against the district attorney's office.

"I hate to speculate on what the result could be," he said. "It could easily exceed our insurance."

Risk manager Jeff Green said he would not publicly release the amount of that insurance until consulting with the county attorney.

With the target budgets set by the commissioners, the various departments now will prepare their budget proposals by Sept. 1. They will be reviewed through that month, and the county manager will have a recommended budget by Oct. 15. The commissioners will review that budget, and public meetings will be conducted in November. The budget will be adopted Dec. 17 following any changes by the commissioners.