Fulton County Cash Reserves Gone - Now What?

I am politically VERY liberal and gladly pay my property and sales taxes and will vote for the TSPLOST on July 31, but I do NOT support the possible mil rate increase being floated out there by Fulton County. 

I posted this blog below on my personal site, atlgal.blogspot.com, in January 2011, where I asked a rather mundane question about how much cash reserve the Commission should maintain, for which we are about to get a very serious response from Fulton County. If you are a property owner in the City of Atlanta, MOST of your property tax dollars go to City Schools and Fulton County (the City gets only about 25%). The news snippets coming from Fulton County, poorly timed just before this region's most historic tax referendum on transportation, is preparing us for a mil rate increase - disappointing at best, irresponsible at worse when you look back at the decisions our Commissioners have been making over that last five years of this recession regarding their own budget.  

I watched the 'sausage making' last year, too, as our Commissioners struggled with the budget and again made questionable decisions that completely depleted their cash reserves and heard the 'rosey' projections for 2013. But here we are and revenue projections continue to be anemic. 

I reprint this blog and strongly encourage my friends on the Fulton County Commission to take to heart the criticism they are receiving about their past decisions (a raise for some County employees in 2011, for instance) and then to make the same really hard sacrifices their colleagues in other municipalities have had to make over the last five to seven years.  

REPOSTED from January 2011

Is Fulton County's 8.3% Capital Reserve enough?

I received an email this week from the office of Fulton County Commissioner Joan Garner, with lots of pretty graphs and some very high level information about the budget that was approved by Fulton County Commission last week. I had already heard the commission had not only approved a budget for 2011 that ate into the County’s healthy reserves but had done so with great gusto! Over $100 million of the $156 million reserve had been dipped into to keep the ‘status quo’ and in fact to give raises to some (not all) Fulton County employees. This will leave, I am told, a reserve of just over 8.3%. The question I ask is; what is adequate reserves for a Municipality under today’s economic reality?

Financial institutions are now required by their regulators to be ‘adequately reserved’ at a level almost 300 bases points (3%) higher than was the base line just five years ago. If a financial institution fails to maintain such reserves then it is subject to extremely close scrutiny, more frequent on site visits by regulatory auditors, and is required to provide the regulator a detailed action plan on how the financial institution will immediately get reserves back up to required minimums. The reason for this increase in reserve requirements is complicated but the bottom line really is to reserve against increasing cost from bad loan and investment losses.

So who provides this kind of oversight and guidance to Municipalities? Who says 8.3% is ‘adequate’ for a Municipality in general or for Fulton County specifically? I was told by Commissioner Garner’s office that 78% of Fulton County general fund revenue is derived from property taxes and we all know property values have been going down. HHHMM…. again, is 8.3% enough? Is it EVER prudent to use almost 70% of your reserve for operating expenses in a single budget cycle, but particularly now? When MOST Municipalities are downsizing departments and not back filling vacant positions, should a Municipality give ANY raises to any employees?

I don’t have an answer but I think on the face of things our Fulton County Commissioners are going to be hard pressed to answer these questions if property values don’t begin to go back up next year. How will the NEXT $100 million deficient by funded, because it’s NOT in the reserves now? I suppose one answer would be to raise the mill rate (again) and fines and fees (again), which puts the burden on the residents of Fulton County who are already suffering the ramifications of the worst economic burden in almost 70 years while the County keeps right on budgeting in the way to which it has become accustomed rather than to the reality that everyone else is facing.

Is 8.3% reserves enough? I guess we’ll find out soon enough.