The Sampson County Board of Commissioners is facing a $700,000 addition to the county’s annual debt service payment, which will rise in excess of $11 million as part of the 2013-14 budget.
The majority of the $11 million fund balance consists of construction of new schools and the Sampson County Detention Center in recent years, with Roseboro Elementary now being tacked onto the debt. Finance officer David Clack gave a finance update to the board at a planning session this week, with talk of the county’s revenue and fund balance, and what the new debt will mean to the tax rate, dominating conversation.
Clack gave a report detailing total revenues and expenditures. It showed $41.1 million in actual revenues of the total budget revenues of $61.6 million for the current year, or 66.74 percent. Last year at this point, there was $40.7 million of $59 million collected, or 69 percent.
“On the whole, we’re 2.25 percent behind budget last year, but we’re $400,000 more in revenues today,” said Clack.
The contingency balance this year is at $811,041, compared with $350,000 last year, with just one budget amendment out of contingency in 2012-13. “Everybody is pretty much in line. We have a few who have underspent their budgets significantly more than last year,” Clack said.
Expenditures show $34.2 million of $68.6 million expended this year, or 49.9 percent of the budget, compared to $33.5 of $66 million last year through the end of January, or 50.7 percent. Once taking into account other financing sources, transfers and appropriated fund balance, the county has spent to date $245,135 more has been spent this year.
“We do want to stay on target with keeping our expenditures low and preserving any savings we’re going to recognize from our lapse salaries and other operating areas,” said Clack.
Chairman Billy Lockamy asked about the new Roseboro Elementary School debt, which Clack said would be about $700,000 annually. An interest payment was made in December, but the first full principal payment with interest would have to be paid by the end of this year.
“We do have money in our debt service fund, but we have not set aside anything related to this particular debt service,” Clack said. “The monies that were set aside in May are related to the debts we already have. It has fluctuated some as far as what we have been setting aside. On the whole, we try to keep (debt service payments) about the same, depending on what other revenues get cut.”
For example, the finance officer noted, if the state cuts the lottery money, the county has to offset the loss with General Fund money or utilize money from fund balance. If costs can be cut and more money can be put into debt service, Clack said, that is what keeps the tax rate from going up.
“Right now, we just know it’s coming on. We don’t really have anything aside to pay for it continuously without increasing the allocation of property tax monies to this, unless we get another source of revenue from the state,” said Clack. “As I said last year, I will be counting on the state Legislature to give us back our lottery money at the full amount.”
That amount has been cut nearly in half.
“For us, close to double is what we (received in the past),” said Clack. “(Each year) we lose slightly less than the payment for Roseboro Elementary School. When we do budget, it’s basically the expenditures that you five guys (approve) that we need to spend, less all the other revenue sources, less whatever fund balance we appropriate — the final number represents property tax dollars. That’s how you set the property tax rate.”
Commissioner Jefferson Strickland asked that county administration look closely at the 2.25 percent reduction in collected revenues so that it might be shored up. He also asked about the fund balance. Clack showed a chart of the last five years of fund balance, which has changed. “It looks kind of like a roller coaster,” he noted.
The balance stood at around $22.7 million in 2008 and up to $23.4 million in 2009. It dipped under $22.5 million in 2010, then to just over $22 million in 2011. It came up slightly to $22.2 million in 2012. Historically,
“Fund balance is going to continue to be used to a certain extent just because of debt service,” said Clack. “We cannot collect an excess of revenues or save enough in expenditures to make up all the debt service that we budget to use.”
The county’s fund balance as a percentage of expenditures is in the 20 percent range. The N.C. Local Government Commission recommends counties Sampson’s size have 25 percent fund balance for cash flow and emergencies. “As our fund balance continues to fall, there will be less to appropriate. The $1.8 million we appropriate in the General Fund will have to go down.”
‘Cut expenditures or raise taxes’
Last year, a penny represented about $389,000. That is expected to be a little higher this year, however the change is not anticipated to be anywhere near the amount needed for Roseboro Elementary School.
“We will be able appropriate fund balance for the difference probably for a year,” said Clack. “I don’t foresee our revenues continuing to exceed our revenues on the whole without a drastic drop in expenditures. We don’t have to have 25 percent (fund balance) in my opinion. That is a goal to shoot for, but I don’t want to raise taxes just to get 25 percent in there unless things change drastically in how we spend money. It would be great to have 25 percent, we don’t really need 25 percent, but we don’t need to be losing a whole lot of fund balance either.”
Commissioner Albert Kirby recalled a “very heated and drawn out budget session” last year, in which the board deadlocked. Commissioner Jarvis McLamb made a proposal that would have cut projected spending, Kirby noted. Kirby said he posed a question to Clack during those budget deliberations about the likelihood of having to raise taxes if the tax base was not expanded and no sizable federal dollars were received.
Kirby said the initial answer was that “some other source of revenue” would have to be found. Clack said that was true, and dipping into the county’s savings account was one of those other sources.
“You can appropriate your fund balance out of it for one year, but then you might be looking at a much higher increase the next year and would have to look at raising taxes,” said Clack.
Strickland said that was last year. Kirby said it involves this year, and Clack concurred that it was all the same concept. If the tax base does not grow and expenditures and revenues stay roughly the same, but there is additional debt service, there will have to be funds to make up the difference.
“What was recommended last year with the cuts that Commissioner McLamb suggested, I thought would have been enough to stave off the need for a (tax) increase, but it was not voted for,” said Kirby. “I’m wondering if now we are visiting a problem that could have been solved last year.”
“Unless we raid the savings account, we’re going to have to look at raising taxes this year,” said Kirby.
“Cut expenditures or raise taxes,” Clack replied. “I’ll say it like that.”
He also noted the $800,000-plus in contingency funds that can be utilized. However, the issue is not going away. Debt service is costing the county $10,435,814 for the current budget year, including paying off three new high schools and the new Detention Center. That will go over $11 million in the 2013-14 budget with the addition of Roseboro Elementary. Financed with long-term loans, nothing will be eliminated from debt service anytime soon.
“The closest thing is the 1999 COPs issue, which will go off in 13 more years. That is about $1.1 million a year with interest a year,” said Clack. “There is nothing close. There is really nothing in the foreseeable future.”
Chris Berendt can be reached at 910-592-8137 ext. 121 or via email at firstname.lastname@example.org.