By. Brent Wilson, Field Officer
The current budget is only a quarter old and Greene County is looking ahead to the next budget cycle. At the September 22nd meeting of Greene’s Board of Supervisors Chairman David Cox asked for any changes to the budgeting process and also complimented staff on the early completion of the year end close which is awaiting audit.
County Administrator John Barley outlined the budget process and also thanked staff for their improved closing cycle. The actual results are the basis for the new budget process. All departments came in under budgeted spending pending review by the auditors and the good news continued in that revenues were up in all categories.
Barkley then went on into specific areas such as the jail budget which will have a larger hit to the next budget, EMS funding, capital projects and the Capital Improvement Plan, Safety/Radio communication system, school facility/buses, public safety issues, etc.
Supervisor Bill Martin, At Large, asked Barkley when the audit would occur and was told it would be advanced from February/March, 2016 to November, 2015. He next brought up the current reserve policy and stated that something needs to be done to make it easier to be understood. It is currently unclear to a lot of people at the current policy of 15% of the annual budget plus one month operating expenses.
Supervisor Jim Frydl, Midway District, explains on his Facebook page, “There is so much confusion about the purpose, definition and reasoning for having a reserve fund. The attachment provides a good explanation for anyone that wants more information. Greene’s current minimum reserve policy is two-part. A 15% minimum plus an additional one month’s expenses equals the total reserve. Adding the two components together equals a 23.3% minimum.”
Supervisor Eddie Deane, At Large, believes that the reserve policy needs to be changed. Martin wants to be sure it is understandable. Deane then commented that he felt the budget needs to be cut as he feels some departments are overstaffed. Last year the budget required $4 million draw down of the reserve fund and the current budget required a $3 million draw down of the reserve fund to make it balance.
The discussion shifted back to the make-up of the Reserve Policy – should it be comprised of all assets (as it currently is) as opposed to only cash. The current policy includes cash along with all other assets. The complaint is that the current reserve policy doesn’t provide a measure of ability to make cash payments.
Shifting back to the outflows – the cost of the water and sewer exceeds $2 million annually. This is a huge drain on the county’s resources and unfortunately the economy declined when this was put in place therefore significantly reducing the number of EDU hookups to subsidize this cost. This is the main issue causing Greene County to have to use some of the Reserve Fund to balance the budget. The fact that departments underspent by 15% raises the question – are budgets in the county inflated?
Supervisor Davis Lamb, Ruckersville District, questioned if the county can continue to “borrow from the reserve”. The water impoundment is projected to cost $40 million and a strategy on how to pay for it needs to be developed. Lamb cautioned that Greene needs to be frugal and must cut spending to help provide funds for the water impoundment. Frydl indicated that a combination of increased tax revenue along with cutting back is needed.
Deane brought up the concern of possibly getting back to having to borrow funds to make payments – like was done in 2003. Frydl agreed that we have to be frugal like was done this past fiscal year. But he had concerns about taxing residents for future needs and just letting the funds sit idle.
Lamb felt that funds need to start to be accumulated to be able to go forward with the Water Impoundment project. In addition, once the financials are audited the calculation of the reserve fund can be done and confirm if it below the current policy level which he fears is the case. If that is the case, then the policy calls for corrective actions until the reserve fund reaches the targeted minimum balance.
After the meeting Tracy Morris, Greene’s Finance Director, stated that Greene County would not be able to borrow the full amount of the water impoundment project. Lamb was asked how much he felt should be added in the next budget cycle to start building funds in anticipation of the Water Impoundment project and he agreed to get back within a day. After two days he has not replied prior to this article being published.
“The new reserve balance will be calculated based upon the Audit which we hope to be around year end. I would guess based upon the unaudited year end numbers that we will still be above out (sic) minimum as stated in our current policy. Keep in mind that our policy requires that we keep 23.3% of the budget set aside, never to be used for any reason. It can not be used for projects or any budget except for emergencies. That is why a lower minimum makes sense. Are you comfortable knowing that 23.3% of your money that we collect is never to be used? That is 17.5 cents of the total 75 cents collected.”
“The water impoundment is a long term capital asset and will be financed via long term bonds or loans. Typically the term for this type of infrastructure is 40 years. The annual payments will have to be considered in the budget discussions. These discussions must include long range forecasting and a decision regarding the prudent reserve minimum along with any additional funds that may need to be collected to provide for the addition of the impoundment investment. Depending upon how we choose to move forward, the impoundment project engineering and construction can be 3 years or 5 years. We are in the process of completing the decisions and planning required to begin the process. Depending upon the pace of increasing demand, and economic conditions, the project can be started within 6 months. The addition of the water and sewer infrastructure fee is an example of the preparation and planning needed before beginning the project.”
Obviously there is a difference in the understanding of where the county stands financially and the calculation of the Reserved Fund won’t be completed until near the end of the year when the audit is completed. Since the targeted Reserve Fund is a calculation of a % of the annual budget and one month’s budgeted spending it can be calculated as needed.
The other side of the comparison is what the actual Reserve Fund balance is – this is a balance in the books of the county. So there can be a calculation performed at any point in time – knowing that this has not been audited. But for management purposes this can be monitored on an ongoing basis. Not sure why the supervisors don’t have this available at least on a monthly basis (without audit approval). We shall see what the auditors say and see if there is a development of a different measurement to gauge the ability to make payments in the short term on a cash basis.
The Board of Supervisors needs to come to a common understanding of finances of the county – and soon.
Brent Wilson is the Greene County Field Officer for the Free Enterprise Forum a privately funded public policy organization. The Free Enterprise Forum Field Officer program is funded by a generous grant from the Charlottesville Area Association of REALTORS® (CAAR) and by readers like you. To support this important work please donate online at www.freeenterpriseforum.org
Photo Credits: Greene County, LinkedIn, Campaign photo