The Town of Paonia may not be headed for bankruptcy, but it is experiencing dwindling cash reserves and a "cash crunch" that needs to be addressed.
That's according to town manager Jane Berry, mayor pro tem Charles Stewart and trustee Ross King. King and Stewart serve on the town's finance committee and have been following the town's financial situation closely.
A lot of cash went out the door in the last seven years, including $647,000 traced to theft by the town's former finance officer. Of that money, the town was reimbursed $149,000 through insurance. The town also owed tax penalties due to errors in filing taxes, paid double overtime to employees who were exempt from receiving overtime, paid cash bonuses, and is making pension payments to one former employee.
The town is paying for what Stewart referred to as "... a lack of financial control." For years, beginning in about 2007, the town spent money at an alarming rate, said Stewart.
The town does have $1.2 million in cash, plus its operating funds, explained Stewart, an attorney with experience in finances. But the cash, for the most part, is restricted or allocated -- a percentage of sales tax must go to capital improvements, money must be set aside for capital improvements to the North Fork Airport, in which the town has 75 percent ownership, and there is money from grants and low-interest loans to pay for projects, most notably the $6 million, state-mandated water treatment upgrade project currently underway.
In short, the cash the town does have isn't readily available.
And while grants are paying for the majority of water upgrades, they are reimbursement grants, said Stewart. The town must come up with cash to cover project costs up front before receiving reimbursements, which can take 30-90 days. Those bills have run as high as $250,000.
The town was also overstaffed after adding about seven positions over the last few years. Unfortunately, said Berry, the financial numbers didn't justify their hiring.
Many of the town's financial problems came to public light recently with the release of the 2014 audit, along with "Town Auditor Viewpoints" submitted by the town's auditing firm, RubinBrown. While audits are always available to the public, the decision to release the viewpoints was made by the board of trustees to provide transparency as they work their way through the process of correcting years of what King described as "benign neglect."
"Previous boards never released this type of information before," said King.
Last fall, prior to Berry's hiring, the town's 2015 draft budget reflected $410,000 in over-expenses. Revenues were over-inflated, too, said Berry, who was hired to help guide the town out of its financial troubles. Berry's salary is paid in part by a grant from the Colorado Department of Local Affairs.
In order to balance the budget, as required by law, three full-time positions were eliminated, and more layoffs may be imminent, said Berry.
Fortunately, said Stewart, the town does have sufficient income flow to cover costs of operation.
Should citizens and taxpayers be concerned that the town will go bankrupt? No, said Stewart. "The only reason thee town should be concerned is if this were not being addressed."