The Resolution Solution

In order to accept what I'm about to tell you - it's necessary for you to suspend all belief in facts, logic, and fiscal responsibility. You'll have to ignore your judgment and believe what Harold Smith (www.goharoldsmith.com) has said about the Capital Reserve fund being a "slush fund" to be true. This will be difficult, but, dear reader, I believe in you.

Good. Let's get started!

First, you'll have to forget that the 2004-2005 (FY2005) Cabarrus County Budget was a budget that had $21.6 Million in Debt Service while the budget before the Cabarrus County Board of Commissioners this month (FY2007) has a total Debt Service of $25.3 Million. A difference of $3.7 Million that covers a debt principal difference of more than $40 Million ($218 Million in FY2007 v. $177 Million in FY2005). (CLICK HERE FOR INFORMATION ON FY2005 v. FY2007 DEBT SERVICE)

Second, you'll have to ignore the fact the preceding three years saw operational deficits of nearly $20 Million. Also, you'll have to kid yourself into believing that this money was appropriated to long-term capital concerns- it wasn't. This money was used to make up the shortfall in revenues to maintain day-to-day operations. (CLICK HERE FOR COMPREHENSIVE 2003-2005 REPORTS)

Third, during that time, the Board of Commissioners, under Privette and his allies, agreed to more than $110 million in debt without once going to the taxpayers. For the time being, just disregard that. (CLICK HERE FOR THE FY2007 DEBT SERVICE SUMMARY)

Fourth, even though the FY2005 budget had an operational surplus of $4 Million, but only because of a $2.6 million appropriation from the fund balance. If you look across the ALL of the spending, it had a deficit of $19 Million because of increased debt and capital expenditures. You'd have to dismiss this also. (CLICK HERE FOR THE FY2005 COMPREHENSIVE REPORT)

Fifth, you've made it this far down the path of ignorance and self-delusion; but are you ready for this? On June 14, 2005, ALL of the commissioners (Privette, Freeman, Juba, Carpenter, and Carruth) agreed to a resolution drafted by Commissioner Carruth that would take all of the undesignated fund balance money over 15% and move it a Capital Reserve in order to reduce future reliance on debt and to control spending. (CLICK HERE FOR THE JUNE 14, 2005 MINUTES WITH RESOLUTION TEXT). In order to embrace the "Slush Fund" argument, you must bury this fact from your thinking.

Sixth, you'll have to accept that the minimum requirements for an undesignated fund balance, as prescribed by the NC Institute of Government of 15% is less of a demarcation line for Raleigh to contemplate taking over the Board of Commissioners; but a good guideline for fiscal prudence. Before the June 14, 2005 Carruth Capital Reserve resolution, the Board of Commissioners rolled over funds from one year to the next covering their tracks of their fiscal irresponsibility. Because we are suspending judgment, we can believe that keeping a Capital Reserve fund is bad policy.

I know you're tired; but there's just a little more to go! For the seventh point, you'll have to abandon the idea, as Harold Smith has written, that the County's current "Double A" Bond rating is not important. (CLICK HERE TO READ WHAT HE WROTE)

Ninth on this to-do list of ignorance, is the effective federal fund interest rate. At the adoption of the FY2005 budget was between 1.03% and 1.26% (June and July 2004, effectively) while today - that same rate has just crossed 5%. Additional borrowing will have much more of an interest cost. In order for us to embrace the idea we'll be borrowing much more money in the future - we'll have to disregard the prevailing financial climate. (CLICK HERE TO SEE THE FED FUNDS RATE HISTORY)

Finally, you'll have to believe the County Manager, John Day, is addicted to spending and does whatever his department heads ask him. You'll have to set aside the fact that the current budget calls for $2.3 Million less in Public School Operational Funding than what was originally requested (CLICK HERE FOR FY2007 CABARRUS COUNTY SCHOOLS FUNDING SUMMARY) and that department heads called collectively for an increase of 31 new positions; but only got 16 in the current budget (CLICK HERE FOR THE FY2007 POSITION SUMMARY). So, you'll have to set aside these facts.

OK, now that we've set aside the fact that John Day did NOT give his department heads everything they asked for, we've ignored the prevailing financial climate, abandoned the County's credit rating, buried the unanimously agreed to 2005 Resolution, dismissed the FY2005 transfer from the fund balance (the fourth one in a row by then), disregarded the $110 Million in new debt by Commissioner fiat, ignored the $20 Million in operational deficits from the three years preceding FY2005, and forgotten that the FY2007 Budget has $40 Million more in total debt and an increase in Debt Service of $3.7 Million than Harold's FY2005 model, we can start believing the the Capital Account is a "Slush Fund".

If you can ignore all of those facts together - it almost seems reasonable!

The Solution

I'm more interested in solutions than rhetoric. Harold Smith likes to call people names, accuse them of malfeasance, and expect others to fix problems that he only points out. I, however, am giving his pals an opportunity to put the people's money where Harold's mouth is.

Eliminating this "evil Slush Fund" only takes a reversal of the June 14, 2005 resolution. On Monday, the Board of Commissioners will consider the new budget (CLICK HERE FOR THE AGENDA). The budget needs to be in place at the end of the month. So, there's enough time to tweak the budget. All it would take would be a resolution. As luck would have it, I have a resolution here.

CABARRUS COUNTY BOARD OF COMMISSIONERS
RESOLUTION

WHEREAS, the proposed FY2007 budget maintains an ad valorem tax rate set by the adoption of the FY2006 budget of $0.63 per $100 valuation; and

WHEREAS, the Cabarrus County Board of Commissioners maintained an ad valorem tax rate lower than $0.60 per $100 valuation for six consecutive years; and

WHEREAS, use of one-time revenues and additional undesignated fund balances to fund recurring operating expenses allowed the lower rate in the past; and

WHEREAS, a June 14, 2005 Cabarrus County Board of Commissioners resolution redirected to funds previously available for future, recurring operational expenses to a Capital Reserve account ostensibly to "reduce reliance on debt financing for capital projects, thereby saving taxpayers' money by reducing interest payments on financing instruments"; and

WHEREAS, this Capital Reserve account constitutes a "slush fund"; and

WHEREAS, in spite of alarmist predictions in the past by the three major bond rating agencies, the County's financial advisor and underwriter, and some members of Board of Commissioners, this "slush fund" is unnecessary and an added burden to the people of Cabarrus County who should not be forced into government-mandated savings.

THEREFORE, BE IT RESOLVED that the Cabarrus County Board of Commissioners wishes to emphasize its desire to lower the overall tax burden by reversing the following fiscal management policies, that were be added to the County's budget document in the 2006 fiscal year:

1. Recurring, operational expenses of the county government will only be funded through recurring revenue sources;
2. The County will maintain an undesignated fund balance equal to 15% of general fund expenditures; and
3. Upon the completion of the annual audit of the County finances, any undesignated fund balance above 15% will be transferred to the capital reserve fund, where it will be used to reduce reliance on debt financing for capital projects, thereby saving taxpayers' money by reducing interest payments on financing instruments.

The County Manager is hereby directed to reallocate all available funds in the proposed budget from the reversal of these policies while maintaining the lowest possible fund balance as required by North Carolina state law and to lower the ad valorem tax rate to $0.53 per the $100 valuation.

Adopted this the 19th day of June, 2006.

Some would say that it's too late to squeeze this into the agenda. I disagree. Coy Privette added the Illegal Immigration Resolution that he got from Mecklenburg County Commissioner Bill James right after the minutes from the previous meetings were approved at the top of a public meeting, and that resolution was discussed at that very same meeting.

If the Commissioners (any of them) believe that Harold Smith is telling the truth and the Capital Reserve fund is a "Slush Fund", then they have this resolution handy (I'm even going to send the attachment to them via e-mail with the proper formatting) at the next meeting. If they collectively believe that the "Slush Fund" argument is comparable to the solid leftovers from the bovine digestive process - it won't get any votes.

The Consequences

Before I asked you to suspend your good sense, knowledge of the facts and judgment. Let them come back. OK, go to the top of the post and re-read those points of fact. Kinda hard to believe this "Slush Fund" nonsense - isn't it?

Now imagine that the preceding resolution not just makes it to the agenda; but that is adopted. Scary, huh? We'll be facing the future more hamstrung than we are now.

Over the next decade, we will pay for the fiscal irresponsibility of the Board of Commissioners from the years 1999-2004. I think that we'll be able to do it as long as we work hard to find viable solutions and maintain the current trend of fiscal responsibility. However, if the voters are lead astray by the false promises and half-truths that have been perpetuated by Harold Smith and the gang associated with the Cabarrus Taxpayers Association - the cost will be great.