Butler County finances look bad

Dec 28, 2010

HAMILTON — One could argue that much of the blame for Butler County’s financial woes can be placed the embattled U.S. economy.

Around 2008, the economy took a sharp turn downward. Sales tax receipts can support that locally. The county is down 0.5 percent from 2009 while neighboring counties are up at least 2.5 percent.

In an e-mail to the county commission, Office of Management and Budget Director Pete Landrum said part of the reason is Cincinnati Premium Outlet.

“Butler County residents have taken their tax dollars across the border into Warren County and/or other county residents are coming into Butler County less for shopping,” Landrum wrote.

Warren County sales tax receipts are up 6.8 percent from 2009.

The national economy is still to blame for many problems, including Butler County’s projected $7 million 2011 deficit.

From 2008, sales tax receipts have dropped 19 percent (granted there was a 6.5 percent rate in 2008 and it is now 6.25 percent). Property tax revenues have dipped 8 percent from 2008. Interest on investments has dropped 73 percent from $9.25 million in 2008 to a projected $3.52 million for 2010 — a $6.75 million difference almost equal to the projected 2011 deficit.

Until the economy went south, Butler County was one of the fastest-growing counties in the state. County revenues increased from about $61.8 million in 2000 to nearly $96.5 million in 2008 . Expenditures went from $61.6 million in 2000 to $94.7 million in 2008.

And during the financial growth, the county commission borrowed money for projects such as fiber optics systems, road improvements, the new jail and the Government Services Center.

Today, Butler County has upwards of $91 million in debt.

Tough budget questions to ask, answer

HAMILTON — There’s been quite a bit of second-guessing of the Butler County Commission lately as it looks at ways to deal with a $7 million projected deficit for 2011.

Tea party supporters and other residents criticized commissioners for considering a proposed 0.25 percent sales tax increase to fill the gap. Then when the Commission elected to make spending cuts instead, supporter of the sales tax idea voiced their disapproval.

The three-man board has also taken hits for not being tough enough when it comes to controlling the county’s spending. In fact, one of its members, Commissioner Greg Jolivette, wrote to Commissioner Chuck Furmon and then-Commissioner Michael Fox in 2006 accusing the board of “spending money like a drunken sailor.”

Jolivette’s letter also mentions a warning from Moody’s, a credit rating agency, to commissioners that said, “If we do not take steps to replenish our reserves, we will receive a downgrade.”

With a multimillion dollar deficit looming in 2011 — which Butler County legally cannot have — the threat of credit rating downgrade may be a little more real.

The County Commission is expected to vote on a budget, which is most likely a one-month budget for January, at its Dec. 30 meeting.

Even though there is a proposal by the Office of Management and Budget on cutting the $7 million projected shortfall for 2011 nearly in half, exactly how the county will get to a balanced budget won’t likely be known until after Commissioner-elect Cindy Carpenter takes Jolivette’s seat Jan. 3.

But whatever is done, Commissioner Don Dixon said it cannot be business as usual, but rather business as it should be. “It’s going to be difficult, it’s going to be difficult all over. But it’s not impossible.”

A second look

Jolivette said it’s unfair to play Monday morning quarterback with the Commission’s decisions in recent years.

“You need to be there at the time the contract was signed to see what was available,” Jolivette said. “And you can’t use the economic times that we’re in now to say, ‘Look at what you can get it at now versus what you got back then.’ ”

Jolivette said the county’s reserves had increased to $14 million before the economy tanked. As a result of the poor economy, those reserves have been tapped into for the past three years, he said.

County Auditor Roger Reynolds has been a constant voice in commissioners’ ears since being appointed to his post in 2008. He said he is concerned about the budget because the county has a “spending problem.”

“My concern for the 2011 budget is to ensure we have spending below revenues, approved spending below estimated revenues,” Reynolds said. “I have a significant concern that over the past two years we’ve continued to spend more reserves than we should be as opposed to cutting the expenditures.

“And now we’re in a position with fewer options than we would have, had we been more disciplined over the past couple years in cutting expenditures.”

Reynolds said he’s done more than voice his concerns; he’s tried to lead by example. Since taking over the auditor’s office, Reynold’s has cut the department’s budget by 35 percent.

What’s next?

Balancing the county’s budget will require some hard decisions about what is to be cut.

County Administrator Bruce Jewett said commissioners hope to have the 2011 budget approved by the end of January.

“It’s not an option. It’s something that has to be done, and it will be done,” Jewett said of approving a balanced budget.

Furmon declined to comment on the budget process, past decisions or future ones, saying he would talk when commissioners are preparing to vote on the new budget.

Commissioner-elect Carpenter could not be reached for comment.

Dixon said he doesn’t think county departments will spend all of their 2010 money based on his own analysis. “That’s only a guesstimate ... but if you take what they’ve been spending and how many days are left ... it appears there’s going to be some money coming back.”

A slow go

Without new revenue sources, spending cuts will happen.

Dixon, though, said he believes the budget issues aren’t as bad as what was presented by Pete Landrum, director of the Office of Management and Budget.

“The carryover is going to be more, I think the expenditures are going to be down. I think our officeholders have held the line,” Dixon said.

But he said the county hasn’t moved “fast enough or quick enough on a number of issues.” That includes hiring a central purchasing manager who would consolidate multiple similar contracts to maximize the county’s spending in certain areas, such as office supplies.

Commissioners and the county administration will be paying close attention to funding cuts made by the state, which has an $8 billion hole and a new governor, John Kasich.

The county’s debt

A complete picture needs to be taken into account with the county’s debt, according to Andy Brossart, the county’s financial advisor with Fifth Third Securities. The county has about $91 million in bond and note debt.

In part, Brossat attributes the debt — and the inability to pay it off today — to a lower sales tax rate as compared to neighboring counties. In the four-county region — Butler, Hamilton, Warren and Clermont — Butler County has the lowest sales tax rate by 0.25 percent.

Landrum said the county’s growth was the reason for the debt, saying the county had to keep up with the demand.

“It was the second-fastest growing county in Ohio and its infrastructure had to grow with it,” he said.

Most of the county’s projects that involved infrastructure and building improvements are tied up in bonds. The county has nearly $75.9 million in bond debt — which cannot be paid off early, but the interest rates are locked in.

Other county projects are in note form. The county has $14.9 million in notes debt — which can be paid off early, but must be refinanced yearly.

Landrum said his preference would be to pay down the debt, but the economic downturn has made that challenging. Debt payments slated for 2011 are only minimum payments.

Revenues, contracts and expenses

County revenues are down, including the top two moneymaking sources — property and sales taxes. Sales taxes took a hit from 2008 to 2009 when the 6.5 percent sales tax was rolled back to 6.25, dropping nearly $5.4 million. It’s taken another hit losing more than $161,000 from 2009 to 2010. Property taxes for 2010 are down $1.26 million from 2009.

Combined, that’s nearly the projected deficit the county’s facing.

But Dixon said by consolidating contracts, he believes millions can be saved.

Dixon has said in past commission meetings that every contract should be scrutinized to make sure the county is maximizing its dollars — which he said there’s about $10 million allocated in “contract services.”

“I think we need to start to look at every expenditure and every contract,” Dixon said.



Post a Comment