Photo: The Town’s new financial advisor, Joey McLiney, introduces some general ideas for solving the Town’s expensive sewer system issues, at the September 19, 2024, Town Council meeting.
Yesterday, I did some seat-of-the-pants math related to an estimated $44 million in future loans that the Town of Pagosa Springs may be seeking, someday soon, to fix $44 million in current, and future, sewer system problems. The system is operated by the Pagosa Springs Sanitation General Improvement District (PSSGID), which includes most of the homes and businesses in downtown Pagosa Springs, but not the homes and businesses uptown.
I wrote, yesterday:
According to my pocket calculator, if 1,600 connections were to pay for $44.8 million in repairs and upgrades, then each connection would pay $28,000. Plus interest payments on the loan. So make it $50,000? Or $2,500 a year, if spread over 20 years…
I’m just a journalist, not a financial advisor, so no one ought to be too surprised if those numbers are somewhat imaginary.
Luckily, the Town Council recently hired a financial advisor — Joey McLiney — with considerable experience arranging big municipal loans for governments, based on what the municipality and its taxpayers can afford. His estimates, shared at last night’s (Tuesday, October 1) Council meeting, were presumably less imaginary than my guesses. Closer to the actual amounts.
He described three methods for paying off the big future debts.
“Revenue Bonds, General Obligation Bonds and a Sales Tax solution…”
The PSSGID has some serious pipeline issues that include — according to a recent videotaping process — sewer lines that are ready to fail and could fail any day now.
In 2023, Roaring Fork Engineering did an analysis of the PSSGID sewer lines, taking an in-depth look into the overall condition and operational functionality of the sewer system. The conclusion: the system will ultimately need to spend millions of dollars to fix its aging infrastructure.
But the PSSGID is also facing additional expenses to meet regulations promulgated by the federal EPA and the Colorado Department of Public Health and Environment (CDPHE).
It appears that $40 million in upgrade coasts are still waiting, further off in the future after the ‘Category 4’ and ‘Category 5’ repairs are made successfully. And paid for.
At the Council’s regular meeting last night, Mr. McLiney stated that the monthly customer rates currently being charged by PSSGID are sufficient to cover the principal and interest on a $4.5 million loan. Because the PSSGID is a “government enterprise” it is allowed to issue “revenue bonds” without voter approval, so long as the monthly customer fees can cover the principal and interest.
The monthly customer fees cannot, however, cover the debt service on the rest of the $40 million in future repairs and improvements without a massive fee increase.
More about massive fee increases in a moment.
Mr. McLiney discussed next “General Obligation Bonds” which would be paid for by a property tax increase, but which would need to be approved by the town voters. Mr. McLiney gave a couple of reasons why he didn’t recommend general obligation bonds, except for smaller, short-term projects like street repairs and parks.
Then he settled in to the ‘Sales Tax solution’.
“Moving onto the next page. And I believe this is the elegant solution that you’ve been looking for. Are we on page 4 together? Excellent.”
“The table shows the sales tax that you are currently splitting with the County. So my suggestion would be to vote a 1/2 of 1% sales tax. Based on the 2023 income, you would end up with approximately $2.2 million…”
That’s $2.2 million per year, collected from shoppers and visitors within the town limits. The tax would be collected by the Town government only — not the County government — and would be dedicated to PSSGID projects and debt service — perhaps $40 million worth of debt, to be serviced over 20-30 years.
This ‘elegant solution’ was suggested to the Town staff, and to Mr. McLiney, last week, by town resident and activist Glenn Walsh, who has been involved in numerous tax-oriented political campaigns over the past couple of decades. He also serves as Vice President on the Pagosa Area Water and Sanitation District (PAWSD) board, and has been instrumental in helping design the current fee structure at PAWSD.
As mentioned yesterday, the Pagosa Springs Town government and the Archuleta County government are partially funded by a 4% County sales tax collected on purchases within Archuleta County, and also collected on online purchases made by Archuleta County residents. Lately, the collections have amounted to about $18 million a year, split evenly between the Town and County, by a mutual agreement. Last year the Town collected about $8.9 million.
The Town has no sales tax of its own.
What Mr. Walsh and Mr. McLiney are suggesting is an additional 0.5% sales tax to be collected by the Town government, within the town limits, and also paid by town residents for online purchases.
At this point, no one knows how much of the $18 million in sales tax collections come from purchases within the town limits, or from online purchases. And no one knows how much of that amount is paid for by visiting tourists. So Mr. McLiney’s estimate of $2.2 million, presented to the Council yesterday, was only that — an estimate. I suspect his guess is too high.
Disclosure: I’m a Town resident, and my family currently pays about $800 a year for PSSGID service. This editorial series will likely reflect those personal concerns.
There is an alternative funding stream that was not suggested by Mr. McLiney. The PSSGID could also fund $40 million in bonds by raising the monthly sewer fee for town residents. That fee is currently $66.50. Mr. McLiney suggested that the monthly sewer fee would need to increase to perhaps $175 a month to pay for the massive sanitation debt the Town is looking at.
Alternatively, he told the Council, the “elegant” sales tax solution would cost the average town household less than $10 a month in added sales tax.
This elegant solution would need voter approval. But only the 900 voters living within the town limits would be able to vote “Yes” or “No”.
Meanwhile, everyone in Archuleta County who shops within the town limits (which includes Walmart and City Market) would contribute to the additional 0.5% sales tax. That includes about 14,000 residents.
Does this sound… unfair?