Why we do not need a Wheel Tax
I have been questioned why do I oppose a wheel tax, to which I have answered…
I, like most people, would rather build schools than jails. We do not have such an option, we need both at the same time.
I disagree with the Bedford County Board of Education (BOE) request for a 804 student Cascade high school. The BOE Master Plan as presented last fall, had a design for a 750 student school. At that presentation Commissioner Yoes pointed out that the student numbers in the BOE plan did not support a 750 student population and said it was more like 550. I agree and urge the plans be adjusted to accommodate no more than 575 students at Cascade.
I disagree with the BOE policy to not zone students past the 5th grade. How can one properly plan for growth and expansion without implementing zoning all the way through the 12th grade and utilize every available asset? By allowing high school students to select which school they attend we have the reality that many desks, even entire classrooms can and will be vacant at SCHS and Community while we spend money to build a larger Cascade. I also point out without zoning, the attendance pattern could suddenly change, leaving a new Cascade with empty classes and overcrowding at the other high schools. Would the BOE then push for larger high schools in the other locations? I urge the BOE to adopt a realistic zoning policy before the new Cascade is built.
Amy Martin, Chairperson for the BOE and also the Coordinator of Finance and Human Resources for Tennessee College of Applied Technology (TCAT), is pushing the County sell its current Vo-Tech school to TCAT for expansion at TCAT, and then build new Vo-Tech schools at SCHS and at Cascade. (costs unknown). I am not in favor of this. First off, it seems like a big conflict of interest for the Chairperson of the BOE to initiate this project. Second, why would the County sell a school to TCAT for less than it will cost to rebuild something it already has?
To move the Cascade project forward, I advocate setting a budget of 15 - 16 million dollars for the Cascade High School without a vocational center or new athletic facilities.
The Jail will require a lot more effort simply because the site and architects / engineers have yet to be selected, where the school already have those in place.
SITES … The previous Committee has a short list of 5 sites. I also would like to add 2 additional sites to look at. This site needs to be selected very soon.
SIZE … a final determination of size will be necessary before we can pick a site. At the last joint meeting of commissioners and the state’s jail officials a year ago, there were no firm recommendations on the size of jail. Based on current need, comparing to past needs, I am advocating building a 250 bed facility, keeping the current workhouse as is and, in the future, remodel the current jail into a juvenile or women's facility.
I recently visited the Grundy County jail which is under construction. It is almost 100 beds and includes new Sheriffs office. The cost is around $6.5 million. I would project that a 250-275 bed facility (without a new sheriffs office) would come in around 15 -16 million.
COSTS AND HOW TO PAY FOR THEM
I have already suggested building a 550-575 student Cascade school to be budgeted at 15 -16 million dollars.
Building a 250 bed jail without a new sheriffs office or Justice Center should be 15 -16 million dollars.
The initial budget for both would be 30 - 32 million dollars. Where will we get this money?
Start with what we have
I have been told that a rule of thumb is 10% per year payment on a bond issue, so 32 million will require a 3.2 million annual payment.
On April 1 2016 there is a bond issue which will be satisfied. That payment of $735,514.00 will be available to pay for new bonds. This will leave us needing $2,464,486.00.
On May 25 2017 another bond will be satisfied. That payment of $630,653.00 will be available to pay for new bonds. This will leave us needing $1,833,833.00, which I believe most of, if not all,
can be found in the current budget.
I believe by a reassessment and realigning of the current revenues we may avoid a huge tax increase.
First let me state that while I am not an accountant nor an auditor, I have read the County’s audits and financial statements and questioned many people who are both accountants and auditors. I feel that the following suggestions are appropriate.
The County Audits
According to the 2015 State Audit of Bedford County, page 31 FINAL BUDGET COMPARED TO ACTUAL RESULTS “At the close of the fiscal year, General Fund revenues were $1,195,480 more than budgetary estimates This favorable variance was due primarily to conservative budget estimates for local taxes in anticipation of the current appeals.” The statement continues, “At the close of the fiscal year, actual expenditures and encumbrances were $1,860,868 less than budgetary estimates. Most of the unspent appropriation is in the personnel and benefit line items. The county typically budgets all positions as being filled for the entire year.”
The combined difference of underestimated revenue and overestimated expenses is $3,056,348.00. Well over what the shortfall of $1,833,833.00 that a future bond issue would require. We need to budget according to the actualities and not leave so much for fund balances.
The audits for previous years showed:
2014 Audit page 32, the GEN. FUND revenue was $1,576,598 more than est. and $1,669,165 less than est. on expenditures…combined total…$3,245,763.00
2013 Audit page 33, the GEN. FUND revenue was $1,140,746 more than est. and $1,507,923 less than est. on expenditures…combined total…$2,648,669.00
Over the last 3 years the county has budgeted 2.6 to 3.2 million dollars LESS than what we actually have. A more realistic approach to budgeting would allow the County to use all the funds it is currently collecting and avoid a huge tax increase.
Property Tax Delinquencies
Our budgeted property tax revenue is based on 1 cent being equal to $74,000. (The County tax rate is $2.27). According to the CTAS 2015 County Tax Statistics report (table 3), the Bedford County 1 cent value is actually $81,355. When I asked about this difference, I was told a certain amount was held back from being budgeted due to delinquent tax payers, which I understand. But further questioning showed a delinquency rate more around 3-1/2 to 4 % NOT the 10% that is being used. Allowing for a more realistic 5% delinquency rate would allow the County to value a cent of tax at $77,287.25. This difference of $3,287.25 per cent translates to $746,205.75 which could be added to the beginning property tax line of the budget, and used for the Debt Service.
Looking back to the proposed 32 million dollar bond and the $1,833,833.00 balance needing to be raised, this amount of $746,205.75 would further reduce the amount needed to $1,087,628.00
Since the majority of the expenditure difference is in personnel and benefits, the simple process of not budgeting an item when you know it will not be spent should allow us to utilize at least 1/2 of the difference. Just a 50% change here, frees up $930,434.00 which would further reduce the amount needed to $157,194.00.
Sales tax is more difficult to estimate because it is subject to the fluctuations of the economy. The only indicators you have are the historical collections of past years.
In 2014, according to CTAS (CTAS TAX STATISTICS 2015 report pg. 16), the County collections were $9,465,032.00 while the budgeted amount was only $7,105,615.00 …2.35 million dollars less than actually reported as collected.
In 2013, according to CTAS, (CTAS TAX STATISTICS 2014 report pg. 15), the County collections were $9,125,925.00 while the budgeted amount was only $6,752,000.00 … 2.37 million dollars less than actually reported as collected.
I admit this is a large discrepancy and I have to believe CTAS has included in their reports the amounts also collected for the towns, so I will pass on this part of the sales tax until I have more accurate information.
However, at the end of the 2014/ 2015 year (June 2015), we ended up collecting $599,706 over the previous year. And, our finance department reported in December 2015, (the 1/2 way mark of the 2015 / 16 budget year), that sales tax collections are $377,285 ahead of this same time last year. I would say it would be safe to budget an addition $250,000 to the sales tax revenue and put that in the Debt Service Fund. This would complete the funding of the 32 million dollar bond issue and have a little left over.
DEBT MANAGEMENT POLICY
By state law, Bedford County has adopted and abides by a Debt Management Policy. Within that policy it is stated that “The County’s Debt management activities will be conducted in order to maintain or receive the highest possible credit ratings.” To that end Bedford County has been successful and currently enjoys a triple A bond rating. The Debt Management Policy also states in section VI.2 AFFORDABILITY … “The County shall consider the ability to repay Debt as it relates to the total budget resources, the wealth and income of the community and its property tax base and other revenues available to service the Debt. The County may consider debt ratios and other benchmarks compared to its peers when analyzing its Debt including materials published by the nationally recognized credit rating agencies.”
Another source of information and guidance for the County is CTAS (County Technical Assistance Service, Univ. of Tennessee Institute for Public Service) which was created by the State to provide a means of information and direction to all counties.
(Referring to CTAS publication #1767… Determining Current Debt Position - Statistics & Ratios)
“In order to have an efficient Debt Management program, you should have an understanding and working knowledge of your current debt position. Various ratios will be used in determining or measuring your debt capacity. Comprehension of the ratios should assist the local government in the following ways: (1) understanding whether your debt will have an acceptable rating by the debt rating services, and (2) determining whether the citizens have the ability to pay for the future indebtedness.
These ratios are a benchmark of your county as monitored by the bond rating agencies. All three ratios must be considered (emphasis added) along with other economic and financial data for the county, region and state. Further the agencies review your annual audits and the quality of management in determining your overall rating.”
The Three Ratios:
Bond ratings are based on the financial stability of the County as a whole and not just the County Government, and uses the income and wealth of the county CITIZENS and not the County Government to determine this stability. None of the benchmarks ever consider how much tax revenue is generated. Neither a Wheel Tax nor an increased property tax will not help the County’s position in any of these ratios. Any additional amount of indebtedness over 32 million I suggest, will obviously widen the margins over the benchmarks.
Additionally on page 1 of the Debt Management Policy, “It is recognized that the issuance of Debt must have various approvals and on occasion, written reports provided by the State of Tennessee’s Comptrollers office either prior to adoption of resolutions authorizing such Debt, prior to issuance and/or following issuance.” It is not just up to the County Commission to go into additional debt, it must be approved by the State first.
Adding my suggested minimum amount of indebtedness to get the projects done ($32 million dollars) will place 2 of the 3 ratios above CTAS recommendations and could affect our bond rating. Any reduction of Bond rating will increase the interest rate and would cost the County addition money. We must be cautious in the amount of additional indebtedness we incur and not overburden the citizens or damage our credit rating.
A building program, as I have suggested, will cost around 32 million dollars. This means we need to find $3.2 million dollars a year:
$3,200,000 annual payment
-$1,339,167 from current bonds being paid off
-$ 746,205 by revaluing the cent of property tax
-$ 930,434 by not over budgeting the personnel
-$ 250,000 by accounting for the excess sales tax
leaves us $65,806 OVER what we will need and no tax increase or wheel tax will be required.
I would add that this does not impact any departments budget, I am not advocating any line item cuts, simply pointing out that the extremely conservative estimates need to be relaxed a bit.
County Commissioner 5th District