need tax rate
Published 12:00 am Wednesday, December 2, 2009
By Jessie Burchette
While Rowan County is in good financial shape, more borrowing could affect the county’s bond rating and bring higher interest rates.
After listening to presentations about projects that could cost the county $200 million, the Rowan County Board of Commissioners got a dose of financial reality at its retreat last week.
Interim County Manager Leslie Heidrick, who is also the county’s finance director, provided spread sheets on current debt and showing payments over the next 18 years.
Heidrick also updated the board on the current budget year and the economic downturn. Based on the first five months of sales tax data, Heidrick said sales tax revenue may be $800,000 less than what commissioners budgeted.
And she said that for the first time in a decade, the county will likely spend more than it takes in.
In looking at the county’s debt stream, Heidrick pointed out that debt payments this year total around $13.5 million. On the current tax base, about 13 cents of the current 59.5-cent tax rate goes to pay debt.
A total of $3.5 million of that is debt for county projects including parks, libraries, the Justice Center and waterlines.
Most of the debt payments this year ó totalling $9.5 million ó are paying off school projects.
The school debt payments continue to increase to $11 million by 2012, while the county project debt peaks in 2010 and begins to decline.
With the current debt load, Heidrick said it will be 2011 before the county can borrow more money without increasing taxes.
If the county has to build a $35 million jail, Heidrick said, that will use up the existing debt stream fund through 2025 without more revenue.
While not recommending any of them, Heidrick said short-term alternatives would be to raise taxes or implement a land-transfer tax or local sales tax.
Growth in the tax base, particularly though recruiting industry and business, could provide some relief in the long term.
Without the jail project, it would be 2017 before the county could have money available for the $100 million-plus list of school projects presented Friday.
To borrow $10 million for 15 years requires an annual payment of $1 million ó or almost one cent on the current tax rate and base.
Heidrick also warned about incurring substantial additional debt and its potential to lower the county’s bond rating.
She noted that the 12 counties in North Carolina rated Aa3 by bonding companies average spending 11.1 percent of their annual operating expenditures on debt service. Rowan is currently at the 11.1 percent figure.
She also advised commissioners that the state Local Government Commission will reject loans or bond programs when the debt service nears 15 percent of operating expenditures.
Borrowing an additional $53 million would add $5.8 million to the annual debt load and put the county at the 15 percent margin.
“If you get close to 15 percent the LCG will turn down the loan,” said Heidrick.
“Don’t go much above 11 percent,” responded Vice Chairman Chad Mitchell.
“I wanted someone to affirm that we don’t have any money,” Chairman Arnold Chairman said at the end of Heidrick’s presentation. “She did that.”
Heidrick reassured commissioners that county finances remain in very good shape overall.
Contact Jessie Burchette at 704-797-4254 or firstname.lastname@example.org.