By: Michael Campbell | Twitter: @itsthesoup
Posted: Mar. 2, 2018 | 2:15 p.m.
PRINCE GEORGE – After receiving a detailed briefing on the status of the county’s unassigned fund balance during their first budget work session as supervisors work to craft next financial year’s budget, a vote to raise the county’s fund balance from its current level died for the second time in five months.
At their meeting in February, a motion was made to raise the county’s undesignated fund balance from where it is currently, 12.5 percent by Supervisor T.J. Webb, the main proponent of raising the fund balance to help the county save more for unexpected expenses that can arise during the course of a financial year. That motion ended in similar fashion to a motion in September to raise the fund balance from 12.5 percent to 14 percent, not receiving a second and dying on the floor.
This vote comes after supervisors received a breakdown of the county’s fund balance and where some of those funds from the previous financial year were committed to from Prince George County Finance Director Betsy Drewry during a Feb. 6 budget work session in the county boardroom.
At that time, Drewry’s report stated the county’s unassigned fund balance totaled $24.9 million following the results of the county’s annual financial audit. Even though that represents well over 20 percent of the total annual general fund expenditures net of inter-fund transfers and inclusive of the Prince George School Board’s expenditures, Drewry noted that millions of dollars of that fund balance were previously committed to other projects by the Board with other projects currently under consideration for fund balance funding.
According to Drewry, there are approximately $2.3 million in known committed items that would utilize fund balance for financing, which includes roughly $1.6 million in stormwater debt proceeds, nearly $300,000 to pay for the bonuses paid out to county employees in the fall and other items.
In addition to the known commitments, there are roughly $4.4 million in potential commitments. Two of the largest ones listed in Drewry’s report are tied with the new fire station planned for Route 10 and a possible school division request.
Regarding the fire station, in the fall of 2017, supervisors agreed to commit up to $1.5 million to costs related to the full build of a new fire station at the intersection of Moody Road and Route 10.
Further, Drewry said they are expecting a request for carryover funds from the Prince George School Board totaling roughly $2.7 million. According to documents from the school division, the $2.7 million would be used primarily for various “facilities, maintenance, [and] repair” projects in the school system, along with furniture, carpet, classroom, and office purchases, technology, infrastructure, and business needs, along with vehicles and textbook funding.
During their meeting earlier this month, the Prince George School Board voted unanimously to send the working document to the county for consideration as part of the carryover funds request with the caveat that items and projects can be added and subtracted as time goes on and needs present themselves.
Due to the size of the possible expenditure, $2.7 million, being over one percent of the county’s FY2018 budget expenditures, a public hearing would be required before a vote can be taken on the school division’s forthcoming carryover funds request.
Combining the known and potential commitments facing the county’s fund balance creates a total of $6.8 million if all the listed items are indeed paid through fund balance proceeds, which brings the unreserved fund balance down to $18.1 million, or 16.6 percent, still above the 12.5 percent minimum currently in place and above the 15 percent that was in place prior to May of 2014.
During the brief discussion, the remaining amount in the county’s unassigned fund balance was a point of concern for fellow Supervisor Floyd Brown, Jr., who said he was comfortable with keeping the county’s fund balance at 12.5 percent.
“I know we have discussed this many times,” he said. “[Betsy] Drewry mentioned that we were sitting around $24 million, or about 25 percent, but she spoke about things that we were already committed to and items that are down the road and that put us around 16 percent. If we raised it, we would only have about 1.5 percent for an emergency.”
“I think we should always have a goal to keep it above that and, if our goal is 15 percent in that fund, then we should strive to do that,” he continued. “As far as by ordinance, I am comfortable where it is right now.”
Regarding setting the county’s fund balance policy, which remains at 12.5 percent, at the budget workshop, Drewry said the county’s bond rating was reviewed in February of last year and their rating was confirmed, keeping the county’s AA+ rating “with a stable rating outlook.” She added that Fitch did ask about the county’s financial policy adherence, which included the 15 percent minimum fund balance policy and, “staff expressed [the] board’s commitment to maintaining 15 percent though [the] policy is at 12.5 percent.”
She went on to say that, “It might be viewed as unfavorable if the policy is raised to 15 percent and [the] actual [fund balance] was below the percent threshold.”
Following Brown’s comments, a call for a second to Webb’s motion to raise the fund balance failed to advance, leaving it dead on the floor before the meeting was adjourned. After the meeting, Webb shared his thoughts about the measure failing to gain traction among the new board.
“I personally don’t have any reservations about raising it, maybe not all the way to 15 [percent] but, at least back up a percent or a percent-and-a-half,” Webb remarked. “I always think it’s a good idea to replenish our fund balance so we can stay in the best position we can be in.”
“My fear is,” he continued, “if we are not very cautious, the same reason we had to lower the fund balance from 15 [percent] to 12.5 [percent] could come up again. I am also against using fund balance for day-to-day operations.”
As the county prepares to deal with how to pay for possibly two new schools and other large-scale capital projects, Webb said he believes the better the county can stand financially will serve to benefit all parties involved going forward.
“The general fund balance is normally is for capital improvement projects and there were things that I have had concerns about where we have dipped into fund balance for operational issues that I voted against,” he said. “We need to maintain our fund balance in case of an emergency that could come up.”
When asked if he will bring the matter back up for consideration for a third time, Webb said the topic “is dead” for the time being.
“I can bring it back in the future but unless the mindset changes, there won’t be any point in bringing it up this year so we will have to see how everything falls out,” he said.