To the editor:
In 2002, a problem started to unfold in Brown County government. It started small and manageable, but before it was conquered, it grew into a local metaphorical 9/11, a Dunkirk. A major disaster.
That initial small problem was with the property tax reassessment, then required by state law. The task was outsourced to a contractor, and several large payments later, the contractor’s work started showing major problems. Contention grew and another contractor was hired to correct and complete the work of the first contractor. It got ugly, with one contractor threatening to hold hostage some of the county’s records it had removed from county offices.
The resulting consequence of this saga came home to roost as the county became unable to send out property tax bills. This, of course, put a major crimp on local government’s finances and put the county on a road toward insolvency. Appeals went out to county taxpayers to make voluntary estimated payments of their property taxes.
I wrote briefly about this challenging time for our county government in a letter to The Democrat published this past April 27, and said that the county had to borrow money from banks to get by. Dave Critser, on the county council then as now, as president then, was good enough to share his memory with me about it. He said other local government units borrowed from banks but the county did not. That could very well be the nature of what I was vaguely recalling. But I found a note to the county financial statement in a State Board of Accounts (SBOA) report of the county in 2005 which stated that the county took out a $500,100 note from Peoples State Bank in March 2006. Neither of us recall its purpose, so my previous comment that the banks kept the county afloat during this time goes into the “uncertain” column.
It was necessary for the other local units to borrow because of the delayed county settlement of tax collections. What the county additionally did, as more than one major county fund fell into the red, was make multiple loans from one county fund to another. Ultimately, it could not pay them back by the end of the year as required by law.
Our troubles caught concerned attention at the state level. Our deficits continued into Mitch Daniels’ first term beginning in 2006 and the SBOA created a special audit report which was submitted directly to Gov. Daniels. From the special audit report:
“As noted above, the County’s General Fund has operated with an overdrawn fund balance for many years due to the lack of timely tax settlements and little, if any, spending controls. The General Fund balances were as follows:
Date — Balance
12-31-03 — $ (295,144)
12-31-04 — (4,404,226)
12-31-05 — (6,133,126)
12-31-06 — (2,891,408)
“Although some improvement is indicated as of 12-31-06, this was primarily due to a temporary loan of $1,660,000 from other funds, which has not been repaid nor has its repayment been locally appropriated in the 2007 General Fund budget. If the temporary loan had been repaid from the General Fund by December 31, 2006, as required by statute, the resulting General Fund balance would have been ($4,551,408). The County’s General Fund has reached a point that recovery may be difficult without alternative revenue sources. The balance of any fund may not be reduced below zero. Routinely overdrawn funds could be an indicator of serious financial problems which should be investigated by the governmental unit. (Accounting and Uniform Compliance Guidelines Manual for Counties, Chapter 1)”
The undistributed taxes earned interest for the county taxing units, likewise not promptly paid out. From the SBOA report:
“Interest earned on tax collections was not distributed to the County’s taxing units but receipted to the County’s General Fund. Beginning with the day following the date for distribution through the actual distribution date interest earned on tax collections totaled $358,255.80, $194,483.47, and $63,992.63, for the 2002-2003, 2003-2004, and 2004-2005 settlements, respectively.”
Because settlements were not timely, some taxing units had to obtain loans to fund operations, and incurred sizable interest costs.”
More research is required for details on the impact this had on each unit such as the school, Nashville, the county, etc. But I did note that during this time the school issued $17 million in tax anticipation warrants, which are a means of short term borrowing by governmental units.
And it’s another research project to attempt to calculate the cost of the Brown County Great Property Tax Fiasco of 2002. Perhaps one should start with what the county paid contractors to do property reassessments. From the report:
“As of December 31, 2006, total payments made by Brown County to all reassessment contractors for the 2002 General Reassessment and various updates were $860,808.27.”
Added to the payments to the contractors would be interest, including from borrowing by the school and any other local governments. I think it’s quite reasonable to say that the total cost was significantly more than $1 million. That doesn’t include any monetary value one might place on diminished government services while this struggle was under way, nor the cost for any project started then abandoned, which had to ultimately start again from the beginning.
Who paid that cost requires no research. We, the taxpayers of Brown County did. When the county audit for 2007 — in which I participated — began, we were still digging ourselves out of this mess. The general fund balance was still well over $3 million in the red. It all started with a small problem that was not nipped in the bud. When it comes to problems in governments, often times size doesn’t matter.
Kevin Fleming, Van Buren Twp.
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