(10/2017) Over the past several months I have repeatedly contemplated how effective local government, County government in particular, can be. This came to mind as I watch the state and house legislative maneuvering trying to develop a budget for 2017 – 2018 which is nearly three months overdue. Since the County operates on a calendar year
budget and the state operates on a fiscal year budget, this produces uncertainty for county funding and cash flow for the remainder of 2017. This dilemma persists as long as the state budget approval is delayed.
As you may recall, this fiscal year the legislature approved the spending side of the budget without knowing what the revenue side would be. This is the reverse method of doing a budget. It was opposed by State Representatives Tallman and Moul; I agree with their opposition. As a county we always begin by determining our revenue and then
balance the expenses against revenue.
This year Adams County started its 2018 budget process earlier to prevent a last week of the year approval. We are making good progress meeting with department directors in a timely manner. If Adams County maintains the 2018 budget development schedule we are on, Adams County may have a 2018 budget prepared before the state completes its
2017 – 2018 budget.
Adams County’s budget for 2018 will be balanced, as we have always done. We do not pass deficit budgets as the state did for 2016 – 2017. Tallman and Moul voted against the state’s deficit budget. Why? Best management practices do not allow spending more than projected revenues. I call that common sense voting.
Also, I believe Adams County Government is more effective financially than the State of Pennsylvania. A case in point is that the County’s bond rating and the state’s bond ratings are headed in opposite directions. Financially the county’s house is in order as evidenced by our recent increased bond rating, Aa2. In contrast the State of
Pennsylvania has had repeated downgrades; their financial house is not in order. Their most recent down grade was a result of not being able to produce a balanced budget.
Why make a bond rating an important issue? Firstly, elevated bond ratings reveal the solid strength of an entity’s financial condition. Secondly, when upgrades occur, it shows that earnest measures and good decisions have been in place and are effective. This has been true of Adams County. Thirdly, it shows investors of bonds that their
risk with Adams County bonds is minimal to near zero. This translates into selling our bonds at a lower interest rate and thus reducing operation costs.
In comparison the state, with poor bond ratings, must pay a higher interest rate to borrow/sell their bonds. Obviously this represents higher operational costs to do business for the state. This is very similar to individuals with poor credit scores; they pay higher interest rates.
There are actually financial benefits to boroughs and townships as a result of a county’s financial strength and elevated bond ratings. The strong financial climate created by the county allows its municipalities to borrow funds at a lower interest. This indirect effect is appreciated by surrounding municipalities when borrowing for capital
improvements becomes necessary.
As a county, we are overdue for major capital improvements. A number of capital improvements and major repairs have been delayed and they are now essential for continued and effective operations. Many temporary repairs have been made month after month and year after year to stay functional, but the inevitable – "judgement day" is
approaching; either replace or face the consequences of disrupted operations and services.
I regret to say that various elements of the courthouse are suffering from age and equipment failures, both the historic courthouse and the newer addition built in 1974. The newness of the county prison is fading and wear and tear are taking their toll. Unfortunately these needs are occurring at the same time as the needs of the courthouse.
The preliminary capital budget to meet these needs has reached a total cost that cannot be covered by the general fund. Also reserve funds are not adequate for the projected capital improvements. Our recently approved bond sale will be necessary to meet our capital needs. In regard to that, delaying our capital improvements allowed us to capture a favorable
interest rate due to the bond rating upgrade. The new bond will also refinance current debt at nearly a 50% lower interest rate. So if there is a silver lining, this is it. The rewards of waiting and preparing for an upgraded bond rating is a measureable cost reduction in borrowing.
To many, the life of a bond could be more exciting. However, it is exciting to see how many positive factors were coordinated to achieve a best cost scenario. With the strategy and monitoring of our county manager and bond council we were able to hit a sweet spot in the market. We were positioned ahead of time to refinance a required
renewal of a note, but we decided to delay until receiving our new bond rating. By receiving the bond rating upgrade just prior to the renewal, we could refinance a higher variable rate for a fixed rate at nearly half the rate of the original note. We were also able to roll our capital budget needs into the low fixed rate bond sale, not achievable last year.
Additionally, our forward preparation enabled us to time our bond sale prior to the fall bond activity that bids bond rates higher.
On a lighter note, I’d like to encourage everyone to enjoy the upcoming National Apple Harvest Festival October 7th, 8th & 14th, 15th, just west of Arendtsville on state route 234. We hope to see you there. Best Regards Commissioner Jim Martin
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