The Price of Liberty is Eternal Vigilance
County Council, March 13
Revenues in General Fund running $6.3 million higher than projected
Bond refinancing leads to substantial cost savings
Bond refinancing leads to substantial cost savingsWarwick Jones
It was “feel good” times on Council last night. Firstly, the external auditor reported that the County’s FY2011 financial accounts received an unqualified opinion. And then staff told Council members of savings in a bond refinancing, and that things were looking up for FY2012 with likely higher than anticipated revenues. However, the outlook for FY2013 was uncertain. Revenues were anticipated to be close to previously projected levels, but costs may be higher than first forecast.
The unqualified or “clean” opinion of Scott and Company LLC, the County’s external auditors, was hardly a surprise. The same opinion has been expressed for each of the 7 years or so that this writer has been covering Council meetings. Despite its repetition, the clean opinion is laudable. The County Administrator praised staff for it efforts and announced that both the Budget and Accounting staff had received recognition from the Government Finance Officers Association (of the US and Canada) for the excellence of their efforts.
Staff in its mid-year review presentation noted that a recent bond refinancing had allowed interest savings amounting to $2.7 million over a 12 year period from 2013 to 2025. The County had planned to refinance three outstanding issues but the Greek debt crisis pushed up yields and it was not possible to pursue two of the planned refinancings. The latter are on “hold”. The County had originally anticipated a total of $6.4 million in savings from all of the refinancings. Total debt of the County is presently about $500 million staff told Council – roughly $200 million in General Obligation bonds and $300 million relating to the Transportation Sales Tax.
Staff also noted that all three of the major rating agencies now rated the County’s bonds as AAA. The high rating partly reflected the high fund balance of $53 million. Questioned by Council members, staff indicated that the rating agencies liked to see a fund balance of no less than two months revenue. This would equate to about $37 million of which $30 million would be the General Fund. This difference provoked a mild discussion about the wisdom of high fund balances. Chairman Pryor clearly did not want the balance to rise and seemed in favor of reducing it. Council member Schweers in a similar vein remarked that he was in favor of a high fund balance but not at the expense of higher taxes on citizens. This matter will surely be debated further in the 2013 Budget discussions in May.
In relation to the FY2012 budget, staff was now expecting revenues to amount to $173.2 million in the General Fund, $6.2 million more than earlier anticipated. The increase reflected higher property tax and Local Option Sales Tax revenues largely. However Council was warned that the property tax figure could not be finalized yet because of the large number of appeals that had to be worked through. Higher than anticipated revenues were also being experienced in other Funds – namely the Transportation Sales Tax, Local Accommodations tax, and Economic Development.
As for expenditures, staff told Council that for the General Fund, offices and departments were working within budget to resolve unplanned costs. This probably can be interpreted to say that costs will be within budget. Staff also said that some funds were under pressure - Employee Benefits were experiencing higher post-employment benefit costs and Workers Compensation was suffering under rising cost of claims.
Discussion over the FY2013 budget will begin next month. Presently, the projections for revenues are essentially unchanged but staff noted that there were cost pressures. Fringe benefits are running higher than anticipated and cost increases relating to the integration of Consolidated Dispatch will start to be felt. (Staff noted that the integration will lead to further cost increases in later years and suggested that millage increases may be necessary in FY2015 and FY2016). Pressure was also anticipated from higher fuel costs and higher levels of inflation.
The County’s internal auditor made one of his regular reports last night. As usual there were a number of findings and most related to minor items in certain departments such as a need for better record keeping, or improving cash collection. His report prompted no comments from Council members except when he mentioned an audit of Charleston Animal Society. Council member Schweers noted that there was no such report in his packet. Internal auditor Stewart acknowledged that he did not normally audit the entity but the report had been forwarded only to the County Chairman. Council members Schweers and Condon asked for copies.