Wednesday, May 31, 2017

UPDATE: Colorado Springs turns to reserve fund for $3.4 million bailout of forecast error

Posted By on Wed, May 31, 2017 at 5:42 PM

click to enlarge Councilor Don Knight: Citizens won't notice a $3.4 million shortfall. - FILE PHOTO
  • File photo
  • Councilor Don Knight: Citizens won't notice a $3.4 million shortfall.
UPDATE:
This blog has been updated to correct a reference made by City Councilor Don Knight to population growth, when he should have said net new construction.

Population growth is not a component in the city's Taxpayer's Bill of Rights formula.

—ORIGINAL POST 5:42 P.M. WED., MAY 31, 2017—-

One percent doesn't sound like much, but it represents a 50 percent forecast error the city made in predicting population growth net new construciton in 2016. And that meant that the city had to pull $3.4 million from its reserve fund.

Population growth and inflation new construction are the two components of computing the city's revenue cap as dictated by the Taxpayer's Bill of Rights.

TABOR determines how much new revenue the city can keep without asking voters' permission.

So what happened in 2016 is that forecasts, made in the summer of 2015, of 3 percent population growth net new constrction in Colorado Springs turned out to be only 2 percent. That meant the revenue prediction was off by $3.4 million, says City Councilor Don Knight, a member of Council's Budget Committee.

The committee, which also includes Councilors Tom Strand, Bill Murray and Andy Pico, met on Tuesday where the bad news got aired.

"When the mayor [John Suthers] recognized this back in the fall [of 2016], he told the department heads to cut spending and save money," Knight reports. But the biggest chunk will be coming out of reserves, he says.

"We were overly optimistic of what TABOR would allow us to keep to the tune of $3.4 million," he says. "It caught us unexpected. If we don't start looking at 2017 now and we let the same thing happen, then it's shame on us."

Citizens won't notice any difference, however, because the shortfall will be made up with reserves. Knight says even after that money is taken from the reserve fund, reserves will total $40 million, or about 17 to 18 percent of the total budget. Experts recommend having 25 percent on hand.

"Nobody's going to notice," he says, "but it not a smart practice" to spend more than the city ends up taking in.

Meantime, the $6 million that voters allowed the city to keep in the April city election to fund stormwater projects isn't affected. Neither is the $2.8 million that will be refunded on citizens utility bills, he says.


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