Ferguson questions mayor’s claims of county financial woes

Some Washington County officials seem to have a lack of understanding about the county’s current financial situation. But the question remains, which officials have it right and which ones have it wrong?
Commissioner Mark Ferguson requested a slot on the agenda for the Feb. 16 Budget Committee meeting to tell Mayor Dan Eldridge the county isn’t broke, despite Eldridge’s repeated claims that the county will need to make cuts because it cannot spend more of its money.
“I am constantly defending the gloom-and-doom cloud that we’re broke, and Mayor, I take offense to this,” Ferguson said, adding he was concerned for the finances of Washington County.
“I would like to take a look at where we’re at financially in this county,” he said, citing figures from the current county budget, the 2009-10 audit, and a Jan. 18 article from the Herald & Tribune that quoted Eldridge as saying, “In 2010, we depleted the fund balance to the point of not having any available money.”
Ferguson said he disagreed that the fund balance had been depleted.
“We all know we’re in tough times, but we’re not broke,” Ferguson said, asking for confirmation from County Auditor and CPA Charles Steagall.
Steagall said a lack of communication is often the biggest complaint for an entity.
“I’m afraid there is a perception that the fund balance is a static amount, but this is basically our checking account,” Eldridge said. “Depleting the fund balance from a cash-flow standpoint is when we reach the $2.5 million mark the state recommends we keep in reserve, and that is what I was referring to.”
According to Eldridge, revenue is received throughout the year, but the bulk of it comes between December and February.
Ferguson argued the county won’t have an accurate picture until all the revenue is received.
“It won’t matter what happens, if you run out of cash,” Eldridge said. “We have to operate so that doesn’t happen.”
Eldridge distributed a handout with a history of the General Fund expenses and balances. During the last 10 years, Eldridge said the total General Fund expenditures have increased by 70 percent, but the General Fund balance is not keeping up.
Ferguson said the county appears to be in a strong position with a General Fund balance of approximately $9 million at the end of January. Eldridge pointed out that while true, that figure represents a single point in time.
“The fund balance is not a savings account,” Eldridge said. “It’s all about cash flow.”
Eldridge referred to the significantly lower November 2010 balance of $5.2 million, which includes the $2.5 million reserve that is not to be touched.
“This leaves us (at that time) with $2.7 million of available funds, which is not even one month’s worth of expenses,” Eldridge said.
According to Eldridge, if revenue and expenses stay the same, Washington County will drop below the $2.5 million reserve, which would threaten the county’s future financial stability.
“This will trigger revenue anticipation borrowing, which will jeopardize the county’s credit rating,” Eldridge said.
Revenue Anticipation Notes are short-term loans issued to be paid off by future revenues, such as tax collections and state aid.
To prevent revenue anticipation borrowing, Eldridge said the county needs to focus on building the fund balance.
“We can’t continue on the same course without triggering revenue anticipation borrowing, and we can’t spend cash we don’t have,” he said. “No, the county is not broke, far from it, but we have to manage the cash flow.”
Along with an increase in expenditures, the county’s debt has tripled in the last 10 years, Eldridge said.
Since July 1, the county has spent $150,000 more than it has taken in, according to Eldridge, who said the projected budget deficit will be more than $400,000 by the end of the fiscal year.
“We will have to learn to do more with less,” Eldridge said. “The circumstances we face are absolutely manageable, but I don’t want us to sit here and think we don’t have to do anything.”
Eldridge said a collaborative effort will be needed, referring to the 5 percent all office holders have been asked to cut from their budgets.
“A focus on cash flow is the first thing that jumped out in the letter from the auditors,” Eldridge said. “They have seen the warning signs. The trends (expenses compared to revenue) are going the wrong way.”
The mayor’s call to rally did not receive an immediate show of support from those in attendance.
Sheriff Ed Graybeal said he doesn’t want to take a step backward.
“I’m constantly being asked if services are going to be cut,” he said.
But Eldridge said not everything being done throughout all of the county offices is essential, and those are the areas that need to be looked at.
“The whole goal is to minimize the effects of the budget cuts that have to be made,” he said.
Circuit Court Clerk Karen Guinn said there are no cuts that can be made in her office without affecting staff positions.
Eldridge advised the group that while Washington County has been fortunate to have never been in this position before, the challenges that are part of the current reality must be dealt with.