County government leaders have been advised to shift expenses, save more money back, and possibly increase local taxes to prevent their cash balances from declining and correct any future budget shortfalls.
Jason Semler, the county’s financial consultant with Baker Tilly Municipal Advisors, presented a comprehensive financial plan at a March 4 joint meeting between the Brown County commissioners and council.
The plan looked at years 2016 through 2021. County leaders requested it to help them better plan for projects and budgets.
“Keep in mind, this is not in stone. We have projections. It’s a living document. It will change every year, but this is our best guess,” commissioner Diana Biddle said.
One of the assumptions made in the plan was that the county would build up a 15-percent ending cash balance in each fund.
“If something were to happen, your HVAC goes out, you do have the money in the bank to pay for it. If taxes are delayed — which hasn’t happened for a while, but has happened before — if distribution is late, it will be nice to have something in the bank that you know is there to help cover at least two months of expenses,” Semler said.
That money also could be used to make additional appropriations if a county official forgot to plan for something in their budget, Biddle said.
The 15 percent figure is a recommendation from the State Board of Accounts. The goal would be to build up that balance and then maintain it each year.
Council Vice President Dave Critser said more than 15 years ago, the county had $3 million total cash reserve. “Now, we have about $200,000 if we’re lucky,” he said.
Steps to take
First, Baker Tilly suggested reviewing what was being paid for out of the general fund to see if those expenses could be transferred to healthier funds. “That’s kind of a short-term fix, not a long-term, but it does work in short-term,” Semler said.
The second recommendation was to match the county’s revenue with expenses in the operating funds.
A third recommendation was to review the county’s overall fees and charges for services to see if they could be increased. “We do this for about 10 or 12 counties throughout the year and that’s one thing that sometimes does not get addressed often enough,” Semler said.
One example is the county’s health fund. Critser said the health department charges less than $10 for a death certificate while other nearby counties sometimes charge up to $14. The cost of permits for buildings and septic systems also could be increased to bring in more money to the county.
The county’s health fund brought in $474,368 of property taxes in 2016. In 2019, it’s projected to go down to $386,849.
“As you can see, in next year, for 2020, when you’re looking at the budget, you can’t maintain the services you’re providing with that revenue you’re collecting in this fund,” Semler said.
Preparing a three- to five-year capital plan was the fourth recommendation.
Increasing the total tax rate in cumulative capital development fund to the maximum rate of 0.0333 was another recommendation. That would result in an additional $30,000 a year for county government.
The CCD fund can be used to pay for multiple projects, including voting machines; the cost of construction, maintenance and repair of bridges; the acquisition of property; remodeling and repair of the courthouse; maintaining and constructing sanitary or storm sewers; purchasing, maintainining or repairing computers and networks; and paying computer maintenance employees.
“This (fund) is something you can pull out and look at when deciding, ‘Where can we move this expense to?’” Semler said. He also suggested other funds that could be used for that purpose.
Where we sit
In 2016, the county spent 96 percent of its general fund. That jumped to 105.3 percent in 2018.
According to the schedule of what was budgeted compared to actual expenses from 2016 through 2018, the majority of the county’s funds are spent at more than 80 percent of the budgeted amount.
Some funds, like the LIT public safety and the CVC funds, were spent at more than 100 percent of what was budgeted in 2018.
The financial plan also included actual and projected cash balances for the county’s operating and capital funds from 2016 through 2021.
In 2016, operating funds totaled about $5.4 million. In 2021, Baker Tilly projected the total at $2.6 million. The county’s operating funds are general; reassessment; health; motor vehicle highway; local road and street; economic development; LIT public safety; convention, visitors and tourism; Brown County 911; riverboat and rainy day.
The county also has two capital funds: Cumulative capital development and cumulative bridge.
In the 2016, the total for both capital and operating funds was at $6.8 million. In 2021, the total is projected to be $2.3 million for both types of funds.
The general fund pays for the “management, maintenance, operating costs and other costs associated with providing county services,” the financial plan states.
Most of the general fund is funded by property taxes. In 2016, property taxes brought in $2.29 million ro the general fund. That decreased in 2017 and 2018 as the county cut back on property taxes and increased income taxes.
The general fund needs to be adjusted by about $270,000 to create the recommended 15 percent balance in that fund, the report said.
“The general fund is your most important fund. The trend is kind of going this way (down) … but your expenses are creeping up,” Semler said.
New taxes?
The final recommendation from Baker Tilly was to increase local income taxes from 2.0234 percent to the maximum rate of 2.50 percent.
The firm also recommended adopting of a 0.20 percent local income tax correctional and rehabilitation facilities rate, which is a part of the local income tax rate. That would result in an additional $690,000 a year for county government.
“That 0.20 percent can be just for jail facilities or rehabilitation. The county gets to keep the entire 0.2 percent. They don’t have to share it with the other units like your certified shares. … Quite a few counties liked that and adopted that rate in the last year,” Semler said.
The money could be used to pay off capital projects and debt, Semler said. But he said many counties adopt the rate to help pay for increased operational costs of those facilities.
Increasing the local income tax levy freeze rate from 0.5234 to 0.6139 percent would result in an another $240,000.
“You could generate that $240,000 not just from income taxes, but you could have a levy thaw and push it back on property taxes. That was just a law that came into play a couple of years ago,” Semler said.
Semler said this the financial report could be used as a planning tool as the county council goes through budget hearings this summer.
Biddle said that once the 2019 budget is finalized, county leaders can forward those numbers to Baker Tilly and they will update the projections for the next three years.
“This is something that we will keep doing and updating every year, so when we approach budget hearings, it’s like, ‘OK. We need to be mindful,’” she said.
