In 2018, Delta County ended with a fund balance (savings account) of $20,487,266 — an increase of 9.7% from 2017. The increase was a result of a 2.8% unexpected rise in sales tax revenues ($4,870,772 in 2017; $5,005,642 in 2018) and a 5.6% increase in property tax revenues ($5,776,572 in 2017; $6,099,552 in 2018), which were expected as the county knows the assessed value going into the budget.
Fund balances are used “to help cash flow operations of the county,” according to a Sept. 26 fact sheet released by Delta County.
A savings account of $20 million sounds like a lot, but according to Delta County Public Information Officer Darnell Place-Wise, “We’re in good financial shape, but we don’t have $20 million just languishing, or that could be spent on ‘just anything.’”
“Local government accounting is complex and confusing,” she added. “There are numerous revenue streams with their own restrictions.” These refer to how certain funds are restricted by the state, voters or county.
For example, Assigned Funds totalling $3,700,545 are restricted by the BoCC for specific projects. Currently $3.4 million is dedicated to the renovation of the county courthouse which will address state mandated court room expansion and improvements. The remaining funds are dedicated to contingency emergency funds.
State restricted funds total $978,767, or 3% of the total budget on hand for emergencies required by the state. Committed funds total $8,902,021 and have been restricted by voters, the state or the county.
Human Services Fund (currently -$17,694) is mandated by the state and used to receive and spend money from the state and federal government to provide human services. Road and Bridge Fund (currently $3.5 million) is also mandated by the state and used for construction and maintenance of county roads and bridges. The report specifically clarifies that, “Money in this fund cannot be spent on anything else like funding new sheriff deputies, or building new trails.”
Revenue for the Capital Improvement Fund (currently $2.9 million) comes from a 1% sales tax approved by voters in 1982 and is restricted to capital projects. The report clarifies that, “Funds can’t be used on things like giving pay raises or paving roads.” $3.4 million of this fund is reserved and dedicated to the courthouse project.
More information can be found on page 8, 9 and 39 of the 2018 Delta County Audit. The budget can be found online at deltacounty.com/DocumentCenter under “Accounting and Finance.”
Other restricted components of the $20.5 million fund balance include gravel inventory ($2,033,736) which are stocks having direct cash value and funds from lottery ticket sales. Money received from lottery tickets are spent on recreation.
According to the report, “The County plans on using a significant portion of these funds to finish the boat ramp at the fairgrounds, and to develop trails in Escalante including the multi-use regional trail that will connect Delta to Grand Junction and the Escalante Triangle non-motorized trails.”
Two parts of the fund balance are “unrestricted”: $2,840,495 that makes up the 25% General Fund Reserve Policy and a remaining $2,031,702.
“The county commissioners have routinely stated that they feel the 25% reserve policy is a minimum that should be held, not a maximum,” said the county report. “Delta County has historically been conservative in its financial management and has been able to maintain a healthy fund balance.”
These reserves, said Place-Wise are “necessary for cash flow,” and create the ability to respond to emergencies, maintain services during economic downturns and save for projects like the renovation and expansion of the courthouse. According to the report, this multi-year, multi-million-dollar project will likely not require any debt due to successful savings.
Regarding reserves, the county follows the requirements and guidelines of the Generally Accepted Accounting Practices (GAAP) and recommendations of the Government Finance Officers Association (GFOA).
GFOA recommends local governments establish policies for unrestricted general fund balances that “considers the governments’ unique circumstances and is designed to ensure the local government has adequate resources on hand to avoid having to reduce service levels, or raise taxes, because of temporary revenue shortfalls or unpredictable one-time expenses.” According to the report, it costs the county roughly $946,831 per month to operate its general fund — which includes expenses like sheriff’s deputies, the Clerk and Recorder’s office, the Treasurer’s office and the planning department. All other taxes and revenues average $465,525 per month.
Reserve funds are used to “help ensure adequate cash flow as revenues are received in varying amounts throughout the year. “
By comparison, in 2017, Montrose County budgeted for six months of reserve, or a total of 86%, and Mesa County holds a total of 25% in reserve.
The remaining amount, $2.03 million, can be spent at the county’s discretion. The report states that this money is used when “something unexpected arises” — like when the county invested $750,000 in broadband infrastructure.
Ultimately the reported clarified that the county uses fund balances to help with variances in operations.
“Instead of relying solely on current revenues that may not always come to the County as projected or planned, the County is able to put certain revenue streams like PILT (federal payment in lieu of taxes) and severance taxes, received in one year into its fund balance; the county can then plan expenses and projects to spend that money the following year. These funds can also be used to offset shortages, to help avoid sudden cuts to services,” it stated.
In 2016 the county experienced a decrease in sales tax and property tax collections, for example, but didn’t have to make major cuts to services and instead used the fund balance.
About the budget process
With fall arriving municipalities are preparing to submit budgets to the state. Per state statute, all departments in the county government must provide their budget requests by the end of September and an initial budget is reported to the state by mid-October. After this the proposed budget becomes available to the public through adoption at the beginning of December. All versions of the budget can be found online at deltacounty.com/DocumentCenter under “Accounting and Finance.”
“The [County Commissioners] and administration then spend significant time going over all revenues, anticipated funding needs, mandates and future outlook to propose a budget,” said Place-Wise.
Prior to adoption, a public hearing is held. Place-Wise said the benefits to the budget process include “accountability to all levels of the organization to manage their spending within the approved budget allowing for future planning.”
Looking at the 2020 budget, increases are currently projected for the Sheriff’s Office, Detention, Planning and the District Attorney. Projected increases for employees are a 2% cost of living adjustment.
The county has to pay for additional mandates from state and federal governments, the Delta County Sheriff’s Office and the jail. Land use codes will also be implemented and phase two of the Human Services building remodel begins. The building will house Administration, County Commissioners, Geographic Information Systems, Planning and Engineering departments — per court mandate for additional courtroom space.
An economic development efforts expansion is also being evaluated.
According to Place-Wise, there’s some concern for a projected recession in late 2020 or early 2021. This is another reason why reserves are important for business to continue as usual when/if the recession hits.
“Our mill levy will drop significantly with the increased in assessed valuation,” said Place-Wise. “The ratchet impact will negatively impact future revenues in the assessed valuation decreases as was experienced in 2008. There’s also continued pressure on court system from child welfare cases, continued growth in human services needs.”