Taxation without representation?

“We have people that are not in the town of Saratoga that are receiving benefits from this joint powers board. It’s almost a taxation without representation issue if the Town of Saratoga can take the money and do whatever they want.”

This statement from Carbon County Commissioner John Espy came on April 7 as the issue of whether or not enterprise funds held by the Town of Saratoga are considered restricted or unrestricted reached the Board of Carbon County Commissioners.

As was reported previously (see “Casting a dissenting vote” on page 1 of the March 11 Saratoga Sun), the Saratoga Town Council had been informed in an email from CPA James Childress that the general fund had been relying on transfers from other funds.

Councilmember Jon Nelson, who has been raising concerns about the status of the Town’s financials for several months, brought the issue to the BOCCC in regards to the Saratoga-Carbon County Impact Joint Powers Board (SCCIJPB) and its funds. While the funds are maintained by the Town of Saratoga, the SCCIJPB is a separate entity created through the joint powers act and officially owns both the water and sewer systems.

“In late February, it was brought to the council’s attention that, for a period of years, it appeared that enterprise funds belonging to the water and sewer, or specifically the water and sewer enterprise funds, may have been transferred into the Town of Saratoga’s general fund and used to shore up some general fund deficits,” said Nelson.

In the February 28 email, Childress had informed the council that the enterprise funds were showing unrestricted status through 2018 and, as such, all transfers were allowable. Nelson added that both Childress and Town of Saratoga legal counsel were presenting this viewpoint to Carver, Florek & James (CFJ), the company auditing the 2019/2020 Fiscal Year, with the intention of receiving a clean audit.

During the workshop held by the Town of Saratoga with Childress and CFJ on March 11, the concern over such transfers was raised and the possibility of including “due to/due from” line items and issuing a qualified opinion was suggested. The following day, an email from Saratoga legal counsel stated that a qualified audit would have repercussions to the Town including the Town’s reputation, distrust over the Town’s financial reporting and the Town’s ability to obtain grants.

Nelson informed the BOCCC that it was his understanding that, if enterprise funds such as the water and sewer fund were to be declared unrestricted, the Town of Saratoga would not be obligated to repay monies borrowed from those funds for the general fund.

“Ultimately, what I’m looking for is some assistance from the county in order to protect these funds and ask that they are considered restricted and ask that they be returned in full,” Nelson said.

When asked by Commissioner Sue Jones if he was not having any progress in convincing CFJ of the nature of funds such as water and sewer, Nelson replied that the auditors were looking for additional information as to whether those funds were restricted or unrestricted. He then asked if the BOCCC would be willing to support the argument that the funds were restricted.

The discussion of taxation came up as Jones commented on the history and purpose of joint powers boards, stating that these boards were part of intergovernmental cooperation between multiple entities for a specific purpose.

“Those monies are to be kept for that to pay loans, to improve, to maintain. That has historically been used in the water and sewer,” said Jones. “My question would be; when one of the parties can take excess funds out of a joint powers board and use in (it) in their general fund, did we get left out because we could take those excess funds … and share those, too?”

Jones then asked if the joint powers act could be used by a town as a backdoor way to pass a tax by charging a fee for water and sewer and then using that money to support the general fund. Carbon County Attorney Ashley Mayfield-Davis stated that there would be potential issues if money belonging to the SCCIJPB was not being spent as it was supposed to according to the agreement, which was established in 1976 and has had no amendments made since then.

“There’s also some funds that look like the Town of Saratoga has the authority to keep. So, I think that’s the hard thing is going back and figuring out, for the last four years or the last 15 or 20 years, what money is being kept by Saratoga versus the joint powers board,” said Mayfield-Davis. “It’s not an easy answer. Then, on the other side … the auditors can do whatever they’re licensed to do in the course of an audit but I don’t think they get to decide who the money necessarily belongs to. I don’t think that’s their role.”

“The Town of Saratoga should be proving to the joint powers board and to the County why these monies would be considered unrestricted. I don’t think it’s the joint powers board or the County’s job to have to prove that the money belongs to the joint powers board,” said Espy. “I think it’s the Town of Saratoga (that) needs to prove that it doesn’t.”

Mayfield-Davis added she believed it was the responsibility of the SCCIJPB to reach out to the Town of Saratoga and request that it be shown the status of its funds. 

“I think we have that responsibility to, if nothing else, understand where the dollars are going and where we’re at in this process for the funds. Ordinarily, you’d think it was pretty clear that those funds are restricted and used solely for that purpose but I’m not an attorney and I don’t … have an answer right now but we should be able to get those answers,” said BOCCC Chairman John Johnson. “So, I think a letter is probably prudent.”

The BOCCC unanimously agreed to send a letter to the SCCIJPB, with the Town of Saratoga, CFJ, Childress, the Wyoming Division of Public Funds and the Wyoming Attorney General carbon copied on the letter.

The next meeting of the Board of Carbon County Commissioners will be at 9 a.m. on April 21 at the Carbon County Courthouse in Rawlins.