It is officially fall – with spectacular colors, cooler temperatures, shorter days, much-needed rain, and at La Plata County, the 2019 budget process.
The Board of County Commissioners on Tuesday will look at the proposed budget for next year, and will spend the next two months taking a deep dive examining the revenues and expenditures county staff has outlined for 2019. In December, we will adopt our spending plan that will begin in January and we invite you to participate in this process.
While budget season officially begins for the commissioners next week, the research, projections and planning has been in progress for months already. County staff carefully watches revenue trends every day of the year and uses that information to guide budgetary planning efforts for the short- and long-term future.
We know a little bit about what we can expect in 2019 in terms of property and sales tax revenues, and for next year, we are anticipating an uptick in both. This is good news, but we expect it to be short-lived in terms of property tax revenue.
While we expect that property tax revenue will increase approximately $640,000 in 2019 – a 4.3 percent increase from 2018 – we anticipate that the Gallagher Amendment and its effect on the residential property assessment rate will constrain revenues for La Plata County in 2020. The Gallagher Amendment, passed by voters in 1982, dictates that no more than 45 percent of the total assessed property tax valuation in the state can come from residential property. When housing values soar, which they have throughout the state – but particularly along the Front Range – the amount that can be assessed for property taxation must fall. The result in 2017 was a decrease in the residential assessment rate from 7.96 percent to 7.2 percent (a 9.5 percent reduction).
The assessment rate adjusts every two years, and preliminary estimates indicate the 2019 residential assessment rate will decrease to 6.2 percent. We project a $760,000 decline in residential property tax revenue in La Plata County for 2020. Still, for 2019 at least, the increase will allow the county to address some of the deferred maintenance on road and facilities infrastructure that we have not been able to do over the past several years.
Another positive sign for 2019’s budget is that sales tax revenue is projected at just over $16.5 million and represents an increase of approximately $750,000, or 4.7 percent over the 2018 budget. This is a fairly significant bump, but one we are comfortable anticipating because the 2017 and 2018 budgets have kept sales tax revenue flat in projections, but the actual amounts we received were above what we had expected. Also, beginning Dec. 1, the Colorado Department of Revenue will require out-of-state retailers to remit state sales tax, part of which will be distributed to counties.
These are two positive signs for the 2019 budget, but our fundamental fiscal challenges remain.
Historically, much of the county’s property tax base has derived from coalbed methane gas production. In recent years, natural gas prices and production have fluctuated, trending downward, while property tax rates have remained unchanged for decades. With an 8.5 mill levy, La Plata County has the fourth-lowest property tax rate in the state. The Department of Local Affairs’ 2014 County Comparison Report of Colorado’s 52 small- and medium-sized counties states the median mill levy was 20.021 mills. When oil and gas activity was strong, La Plata County’s low mill levy rate was adequate to support the county’s full level of service. Now, the disproportionately low tax rate has become a financial vulnerability.
The 2019 budget will respond to this structural challenge with a three-pronged approach of cost-savings measures, revenue enhancements, and innovations and efficiencies. While these short-term strategies position La Plata County to navigate through 2019, they do not provide a platform for long-term fiscal sustainability, particularly when many of the county’s services are statutorily required.
Engaging all of us in a meaningful conversation about what La Plata County must do – the mandatory services we provide – what the County does do – the discretionary services, and what we could do, shaped by our community’s vision for La Plata County and how we invest in that vision, will be our highest priority task in the year ahead.
Please join us in this effort beginning now with the budget process. The Board of County Commissioners will be presented with the proposed budget at 10 a.m. Tuesday at 1101 E. 2nd Ave.
We will hold a public budget meeting from 5:30 to 7 p.m. on Oct. 23 in the same location.
Gwen Lachelt is chair of the La Plata County Board of County Commissioners. Reach her at (970)382-6219.
