County Transfers $6.2 Million to Capital Fund

As of Friday, January 14, 2011

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 florence@thepilot.com.

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JoeGarrison 2 years, 4 months ago

Before all the doom and gloomers get on here and begin their well thought out dribble I just have to say bravo to the current board on their actions so far and again things are looking up for Moore County:)

deidretg 2 years, 4 months ago

If Mr. McSwain makes this all work and keeps his promise from last summer that taxes will not be raised and we see that things like the Sandhills Community Action Program are actually put back on the Board of Commissioners' list to get their temporary shelter for homeless women and their children (got canned last year 2 weeks before the $55.2 million money grab) I will definitely have to give him credit for financial wizardry. Hopefully, Washington DC won't steal him away from us before he makes the rest of our county debt disappear by moving the money around.

JoeGarrison 2 years, 4 months ago

Why David it must be a cold day in Hell today because I think you just considered the possibility that not everything is as bad as you claim:) Is that some common sense I hear? Hopefully you are righting the ship and joining the land of the sane and happy:) Come on....don't fight it:)

deidretg 2 years, 4 months ago

I am giving Mr. McSwain every opportunity to keep his word. That is not to say that I am convinced that even the wizard himself can pull this off. I will know that he has succeeded when I see the funding of the Sandhills Community Action Program for their temporary shelter for homeless mothers and their children who were so brutally denied last year just two weeks before Daddy Law went for the $55.2 million. That fact doesn't play well on the back streets of Moore County. Of course, where you guys hang out all is $$$$$ and roses. Anyway, thanks for the compliment, real or not.

sneakdeac 2 years, 4 months ago

If they want to avoid interest expense, why don't they go ahead and pay it against our current debt so that we are not paying interest at least on this amount now. I am sure the rate we are paying now is more than the current rate. When we pay this off we coud put the amount of the payments and interest into this account to build it up.

deidretg 2 years, 4 months ago

You're hired!! Report immediately to Carthage and help those folks. Great thought, anyway.

Bflat 2 years, 4 months ago

6.2 mill for capital improvements isn't much when there will soon be over 300,000,000 in debt for capital improvements! The $7.3 million funding shortfall to Moore County for education will have to bet met somehow. Raising taxes during a recession will cause further harm to the economy of the county.

deidretg 2 years, 4 months ago

For those who think it just doesn't matter how the 'Powers That Be' in Carthage spend our money, take a break from what you are doing and watch 12 minutes of reality that will be bearing down on our Budget Planners for Moore County like a runaway freight train.

deidretg 2 years, 4 months ago

T. Cary McSwain promised us $300,000,000 in capital expenditures back in 2007 and by George (GOP) it looks like we shall have $300,000,000 no matter what goes on in the real world. I do suggest that he at least read this report that hit the AP Wire at 2:29pm this afternoon, Sat. Jan 15. Might just take a little sparkle out of his magic finance wand................... http://news.yahoo.com/s/ap/20110115/ap_on_re_us/us_debt_wars