Warren County government has made it 16 years with a property tax rate of $1.96.
That achievement comes at a price.
According to Cumberland Securities Company senior vice president Scott Gibson, who has been the county’s financial advisor for 25 years, the county will have to dip into its savings to meet its payments on the principal and interest on outstanding loans, a situation that has put the county on an undesirable financial path.
“I just want to warn you before you keep digging this hole and the hole gets too deep,” said Gibson. “Let’s stop digging the hole and let’s get back to where we are getting the county on a positive step forward for the benefit of you, your children, and your grandchildren.”
Gibson offered a presentation about the county’s current financial situation during Monday’s Warren County Commission meeting.
“The county’s combined debt service payment for June 30, 2019 will be $3.06 million,” said Gibson. “You do not have enough revenue coming into that fund to cover that.”
By the chart provided, the county’s revenue into that fund is less than $2.8 million. Debt service payments will remain unchanged for 2020 and 2021, at $3.06 million.
In 2022, that payment will increase to more than $3.4 million. The county will have to dip into its savings to make up those shortfalls.
“You do have a good fund balance, which is basically your savings account,” said Gibson. “You’re going to be using money the commission worked diligently to build up over time, a little bit each year. You are starting to spend that back down again. If you issue new debt, that will be depleted even faster. My concern is, while the county is in pretty good shape, we are starting to get on a path that is not sustainable.”
Gibson pointed out more debt could be on the way as the county voted to borrow $6.5 million for jail expansion. That money is not yet on the books, but $6 million in debt for school projects at West and Bobby Ray was issued in the spring.
If the $6.5 million jail expansion money is used, the county’s annual debt service payment will exceed its revenue through 2025.
In 2019, the county’s fund balance is estimated to be $7.6 million. Using that fund to make up the shortfall annually for seven years will reduce that amount to almost $3.8 million in 2025.
“The fund balance that you spent 10, 15, 20 years building up basically disappears, or gets very low,” said Gibson. “This assumes for the next decade that the county will not issue one piece of debt for a roof repair, an HVAC unit, sheriff’s cruisers, ambulances, no school improvements past the $6 million that you’re doing, nothing that you’ll need new revenue to pay for.”
Gibson voiced hesitancy that the county can go without adding more debt.
“Unfortunately, while you have had this low tax rate for a long time and your revenue is growing a little bit through growth, it is not growing substantially. Your other expenses are growing, probably faster than your revenue: i.e. healthcare costs, which are really going up. The concern is, once again, that you are heading on a path that is not sustainable long term.”
Along with other improvements, commissioners have discussed the need to replace the roofs at the courthouse, health department and administrative building for several years but patching only has been done instead.
Gibson says delaying projects is why the county has gone years without a property tax increase, but that cannot continue.
“It’s more of a revenue problem and not an expenses problem,” said Gibson. “You do a great job at controlling your expenses. We want to pay our debts. I would be very concerned for cutting more revenue out of this when we really need to be add revenue to pay for the debt we already have.”
A penny in property tax revenue generates approximately $65,610.