County Transfers $6.2 Million to Capital Fund
Moore County will jump start financing for future capital improvements by transferring $6.2 million from the fund balance to the capital reserve fund.
Once the transfer is made, the county's capital reserve fund should total $11.2 million.
The subject will appear on the agenda for the next meeting of the Moore County Board of Commissioners.
"Historically, this county has always budgeted so there are some surplus funds," said Chairman Nick Picerno during a Jan. 6 special board meeting.
And this money is the source of the county's capital reserve. In previous years, the commissioners voted to establish a capital reserve fund by transferring the unappropriated fund balance beyond a specified limit into the fund, providing a cushion for building needs. That minimum fund balance is now 15 percent.
The Local Government Commission recommends that all local governments in North Carolina maintain a fund balance representing at least 8 percent of general budget totals. This allows counties and municipalities to have on hand sufficient cash flow to cover basic operational needs in case of a financial crisis.
The subject arose during an update on changes in fund balance classifications adopted by the Governmental Accounting Standards Board (GASB). The changes use new language for accounting procedures but do not change budgeting or financing methods for local governments.
Ted Cole, a financial analyst with Davenport & Co., presented a funding analysis update delineating the county's current financing approach by comparison with the GASB approach. The new accounting definitions were introduced to the commissioners in December when the 2009-2010 audit was presented.
Cole said the funds in excess of the 15 percent minimum are presently available for transfer to the capital reserve fund at any time by the board's direction.
County Manager Cary McSwain said the GASB approach relates only to how the county reports fund balances but does not change how the county handles the budget.
Picerno said he really wants the public to understand how the board is handling its fund balance and how it is creating the capital reserve fund.
Cole added that continuance of this trend would mean payment of debt service without increasing the property tax rate. Because of the economic recession, interest rates are at historic lows right now, but Cole pointed out that once the economy recovers, those rates should begin to climb.
"It can add up pretty quickly, especially as you reduce debt service," Cole said.
Cole's analysis plugged in the debt service up to 2011, including issuance of the $32 million in limited obligation bonds for the public safety-detention center, with projections of totals and debt payments yearly through 2031. He cautioned that the figures are valid through the county's current debt status and do not provide for future bonded indebtedness.
His finance projections carry no tax rate increases incurred because of debt service.
McSwain recommended that the commissioners consider an ordinance establishing the county's priorities for fund balances. Adoption of such an ordinance could be changed by future boards simply by passage of a resolution, he explained.
The four commissioners present agreed that the $6.2 million should be transferred to capital reserve but, on the recommendation of County Attorney Misty Leland, decided to wait until their next meeting to make it official. (One commissioner, Larry Caddell, was absent because of a prior commitment.)
In a telephone interview since the meeting, McSwain recalled that a 2008 board decision to build up the fund balance to 25 percent resulted in an upping of the county's bond ratings with Moody's and Standard and Poor's. The board later dropped the percentage to 20 percent, then to the present 15 percent, all in an effort to avoid interest payments.
"If you set a solid financial plan and plan for future needs, you can pay for it without interest," McSwain said. "But first we have to pay off our debts."
The capital reserve fund projected at $11.2 million later this month will be available for future buildings but will not be directed toward payment for the public safety complex because that cost is covered by the bonds issued last year. That debt service, along with previous debt service for such things as school buildings, is now incorporated into the county's budget picture. The debt service figure listed for 2011 totals almost $10 million.
County building needs include additional space for the courts and a new local government office building.
Contact Florence Gilkeson at email@example.com.
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