Is Lee County Hoarding Too Much Money?

Argument Over Money Really Irrelevant To Sales Tax

Another salvo was let loose today in the battle over the upcoming sales tax referendum--yet headlines may influence voters.

In today's Herald there was a much needed rebuttal to the John Locke Foundation's report. This report, released last week, claims to identify almost $10.3 million in revenue and savings the county could use to meet its needs and received large headlines. The Foundation is issuing similar reports on counties with sales tax increases on their ballots.

The reply came in the form of a written response released yesterday to the Herald by County Manager John Crumpton, and, what he said could be summarized as "That ain't necessarily so." Having a reply to that report has been on the to-do list of the of the Fair Tax for Lee Committee.

Crumpton is exactly right when he disputes the $10.3 million figure. That is what the number would be if the county were run strictly by the Locke Foundation's philosophy and the report's formulas. I don't know of a county run strictly by that philosophy and the report's formulas do not take the varying needs of counties into effect.

There is room for honest debate, however, about the $3.6 million extra in the county's fund balance. Here is the deal. North Carolina's Local Government Commission was formed during the Depression and is charged with keeping local government financially sound. A minimum 8% of the budget must be kept on hand to help handle cash flow needs. No one disputes that.

What is in dispute is a matter of local policy--how much more to keep in the fund balance. To put the issue in household terms--how many months of savings does a family want to keep in savings toward a future purchase, vacation, or emergency. The report appears to be correct that county does have available $3.6 million beyond the minimum 8% fund balance. The current board of commissioner's policy is that it will strive for an 18% fund balance and not allow the fund balance to fall below 14%. The board policy also is that it will set tax rates in the years of re-evaluation and then not increase taxes for four years until the next revaluation. Having a little extra money in the bank helps make that policy possible.

In reality, the amount of money on hand has little to do with the need for the 1/4 cent sales tax. At least the stated intention for the extra revenue is generally to provide more regular income so that the county can borrow more money for capital projects. How much money the county can borrow is regulated by the Local Government Commission. Just like most of us, how much money we can borrow is a function of our income. Passage of the 1/4 cent sales tax will allow more borrowing and that money has to be paid back with the proceeds of that 1/4 cent tax.

The County’s current debt capacity without new revenue is $8 million. The county is in the process of borrowing $1.6 million for the Board of Education to use to replace 3 roofs (Greenwood, J. Glenn Edwards, and J.R. Ingram) as well as put technology improvements at 11 schools. This lowers the debt capacity to $6.4 million. There is a critical need for renovations of the San-Lee Dam. The Local Government Commission recommends maintaining approximately $4 million to meet emergencies and unforeseen events. Debt capacity will grow around $5 million per year as existing debt is paid off.

In short, a project such as renovations at Lee Senior High School would have to wait 3-4 years before funds could be borrowed to finance them. So the Locke Report stirs up a lot of data but leaves voters with little valuable information.