Administrator answers questions about tax suitAdministrator answers questions about tax suit

RBC — Pat Hooker, Rio Blanco County administrator, responded to questions about the use tax and the potential effect if the county loses its lawsuit with ExxonMobil.
Question: Does the county have a good case?
Answer: Our special legal counsel is optimistic the county will prevail in this case. We should know by year’s end if the Colorado Supreme Court will be hearing our case. To date, the county has spent some $219,000 on special legal counsel fees.
Q: What are the potential financial implications to the county?
A. Until a ruling is determined by the courts, the full potential financial impact on the county cannot be determined (if the courts do not rule in favor of the county). However, the county is proceeding with diligence and is estimating what we believe to be a reasonable amount of reserve to cover the potential impact of a negative outcome. For the 2009 county budget, we have earmarked an approximate $12.5 million reserve.
It needs to be noted, if the courts do not find in favor of the county in this case, the county will be forced to pursue alternative sources of financing to replace the loss of use tax revenues.
Q: How would the potential loss of the $12.5 million, as well as the loss of future use tax income, affect the budget process?
A: The $12.5 million is our best estimate for a “prudent reserve” in the event we lose this lawsuit. It represents both monies we have already collected and an estimate of those use tax revenues we “might” collect in 2009.
As for the impact on the budgeting process, even though the county has been and will, in all likelihood, continue to collect use tax revenues until the courts issue their ruling, knowing these revenues are being disputed limits the county’s ability to use these funds for county expenditures. Reduced or disputed revenues hinders the county’s ability to meet our ever-increasing operating expenses.
Thus, if the county loses this source of revenue, we’ll be forced to pursue alternative sources of revenue in order to meet the county’s operating expenses.
Q: What impact has the use tax lawsuit had on the county’s relationships with energy companies?
A: With few exceptions, the county has excellent working relationships with all companies (energy and others) operating within the county. The use tax issue has, thus far, not had a negative impact on any of those relationships, even ExxonMobil, the company involved in the litigation.