I recently asked Castle Rock town manager Mark Stevens for his thoughts on the state of the town's finances. He kindly provided me with the following statement for publication here, which I hope you find helpful:
"The Town's major sources revenue are variable - sales tax, taxes and fees on new development, user fees. The slowdown in residential construction has reduced taxes and fees on new development by over half of what has been annually collected in recent years. The slowdown in construction, population growth and other economic factors has reduced the growth rate in sales tax revenues. The unusually high levels of precipitation, coupled with conservation efforts and economic factors, have reduced water revenues from previous years."
"During this period of slower growth also comes a slowing of increased demand for various Town services and projects. So to help offset reduces revenues, expenditure reductions can be made through deferring some planned capital improvement projects, spending less than budgeted amounts for various materials and supplies and not filling all authorized positions as they become vacant."
"However, the Town has made a number of commitments for needs such as new parks, open space acquisition, street construction and improvement projects, maintaining the quality of police and fire service, providing some public transit services and pursuing a long term renewable water supply. The Town has also made commitments for important special projects such as infrastructure to enable there to be a new middle school in the Founders area, launching a downtown program including a joint venture with the County for a downtown parking structure and initiating a neighborhood traffic calming program. As a result of these and other commitments, cutting expenditures mid year to fully offset revenue reductions would result in reductions in levels of service and significant disruption to projects planned or committed."
"Fortunately, because of the voter approved Measure 2A Five Year TABOR 'time out' that runs through 2008, along with some good recent revenue years and overall conservative financial management, the Town has been able to accumulate operating reserves in some of its major funds. These operating reserves, sometimes referred to as a 'rainy day fund', give the Town a cushion and some flexibility to use some reserves in addition to expenditure cuts to manage during these more challenging financial conditions. This is the approach being taken for the balance of 2007."
"Continued revenue shortfalls are forecasted for 2008. While some reserves can also be drawn upon in 2008, it will likely be necessary to make additional expenditure reductions and/or slow the growth in expenditures in 2008. While the 2008 budget process is just beginning and the Town Council has not yet weighed in on its 2008 priorities, it is quite possible that additional planned capital projects in water, sewer, storm water, streets and other areas will have to be deferred, and operating expenditure reductions will have to be made that impact current levels of services. As one example, while residential growth has significantly slowed, we still expect over 3,000 additional Castle Rock residents in 2007 and 2008, but with the current sales tax growth of 3% we would not be able to afford to replace all authorized positions as they become vacant or add many, if any, new positions, and less employees directly translates into less capacity to maintain services and undertake projects."