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Ignacio looking at a financial crisis

By Ann Butler Herald staff writer

Ignacio is looking at some serious belt tightening as the Town Board and staff consider a $660,000 adjustment to its general fund.

“We can’t sustain the town of Ignacio the way we are doing it now without going bankrupt in the next 18 months to two years as I figure it,” Mayor Ena Millich told the almost 25 attendees at a Town Board meeting Tuesday evening. “We have $105,000 transferred out of a grant that shouldn’t have been, and we have to pay it back.”

But that’s not the biggest hit.

Town manager Michael Lee said in 2006, the value of the town’s capital assets such as pipelines and buildings, was mistakenly added to the town’s general fund as though it were cash in the bank. That gave the town the mistaken appearance of having more than $1 million in the fund.

The error has rolled over year after year since then, and trustees and town managers made spending decisions based on that amount, including lending money from the general fund to its water and sewer funds, both of which have been operating at a loss the whole time.

The end result is more than $555,000 less in the general fund than the town trustees thought they had.

“It didn’t disappear, it was never there,” Lee said.

No one seems quite how it happened or why it wasn’t spotted earlier.

“We’ve got board members, we’ve got a city manager, we’ve got lawyers,” Pete Vigil said, “and no one knows what happened?”

Another question is why the auditors, who review the accounting every year, never appear to have said anything.

“Somebody didn’t realize what they were doing and just kept doing what they did the year before,” Lee said. “In my opinion, it’s not anything nefarious, it was ignorance, an accounting error.”

The board is looking at a combination of fixes, and has come up with eight options so far, but there’s no doubt sacrifices will have to be made.

In 2011, the water fund lost about $70,000 and the sewer fund about $31,500. Although sales taxes have recovered almost enough to cover those losses, Lee said, ultimately the water and sewer funds have to start breaking even. Town residents already pay $60 per month for sewer services, one of the highest rates in the state, and $30 to $35 per month for water, which is about average, Lee said.

“I think you should look at a combination of stuff without just raising rates,” Bernadette Lopez said. “I’m not willing to bear the brunt of someone else’s mistake.”

The city is paying off debt to the state of Colorado for the water fund at an interest rate of 5 percent and to the U.S. Department of Agriculture inherited from a bond issued by a sanitation district that dissolved three years ago, which is at a 4 percent interest rate.

“The problem is that they won’t refinance something that’s losing money,” Lee said. “We’re between a rock and a hard place on refinancing.”

The board also will be considering budget cuts, including layoffs, a mill levy, sales-tax increase, which would have to go before voters, grants from proposed gas-fund reserves and looking for innovative ways to reduce water and sewer operating costs.

The town did get a little good news Tuesday. Brainstorm Internet is offering its municipal offices free telephone and Internet services in exchange for permission to build an 80-foot tower in the town’s maintenance yard. That would save the town about $7,100 a year, but first, the board wants to run it by the residents in the neighborhood where the tower would be built.

The Town Board scheduled a special meeting to begin at 6 p.m. Nov. 27 to discuss both the Brainstorm offer and the budget.

“I guarantee not too many people have lost as much sleep as I have over this,” Millich said. “But I have to give credit to the staff. If they hadn’t caught it at this point, we were looking at going straight into the ditch.”

abutler@durangoherald.com

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