Fall, the season of vibrant colors and spectacular sunsets, cooler days and colder nights signaling winter can’t be far behind.
Fall also means “budget” with several Council meetings dedicated to reviewing the budget submitted by staff and ultimately approving a budget for the next two years.
Colorado law requires that municipalities have a new, balanced budget approved before the end of each year.
Although the budget consumes a lot of Council’s time in the fall, the process actually begins in July. During this process, staff is conservative in projecting future revenues but they estimate on the high side when considering the cost of capital projects.
Staff is also diligent in finding grants to cover some of the costs of large projects, and projects are evaluated to determine if they can be completed in-house with the same level of expertise at less cost.
This year staff began with a “zero-based budget” because our new city manager wanted to know where every dollar was allocated and the rationale.
No budget is really zero-based. There are certain expenses that carry over year to year with adjustments for inflation, including personnel and operational expenses.
For most organizations – and the city is no different – personnel is the biggest expense. This year 67 percent of the city’s budget is allocated to personnel, which includes benefits such as health insurance and retirement. Operational expenses include supplies, training, information technology, staff cell phones, and vehicles. Each department also budgets for water, trash collection and electricity expenses incurred by their division. Projected expenses are based on what they cost a department the previous year with a percentage increase factored in for the new budget.
Once base expenses are budgeted, department heads develop a capital needs/wish list. These might include water line replacements, street improvements, upgrades to the broadband system, the construction of a new neighborhood park, or an upgrade to a city facility. Suggestions from citizens are also considered. While a capital project for a family budget might mean budgeting $4,000 to paint the house or $10,000 for a new heating/air conditioning system, capital projects for the city run in the hundreds of thousands to millions of dollars. The city does not generally borrow money, so staff often begin setting funds aside years ahead of an anticipated project to ensure funds are available when needed.
With lists in hand, department heads gather to discuss city-wide needs and set priorities. Public health, safety, and quality of life are at the forefront, and the overriding goal of the budget process is to provide citizens with the services they need at an affordable cost.
The Reserve Fund is an important part of the budget. Often considered the “rainy day” fund, the Government Finance Officers Association recommends 25 percent of the budget be held in reserve, “in case” – in case of an economic downturn with revenues below projected amounts; in case of an infrastructure failure that must be addressed immediately; in case of an emergency. This percentage is based on a national average which includes large municipalities such as San Francisco, Denver and Phoenix along with rural areas like Cortez.
Cortez traditionally maintains a 20 percent reserve, which translates to about $4 million in a bank account. We receive very little interest on these funds, nut we do receive a number of free banking services such as use of credit card machines; no monthly account, wire-service,stop-payment or transaction fees; and advice on credit card and banking laws.
Developing a balanced budget requires time, effort and a lot of give and take from staff. We had a bit of a hiccup this year at the initial budget meeting, but I have been assured that the issues have been resolved and staff will have a balanced budget to share at this week’s Council workshop and budget meetings.
Citizens can have confidence that their tax dollars are in good hands.
Karen Sheek is the mayor of Cortez, a position elected by Council members.Reach her at ksheek@cityofcortez.com
