Follow the money

Emergency Communications center under construction


You may have noticed the new communications towers going up around the county or the building under construction behind the Sheriff's Office. They are part of a massive upgrade of Goochland County's emergency communications capabilities mandated by the Federal Government. The price tag for the project, which is expected to be completed in the next year, is approximately $10 million. Initial costs were paid for out of the General Fund.

While there is enough money in the county coffers to pay for the entire project, finance staff and consultants recommended borrowing to pay for the project to avoid depleting reserves and take advantage of the current favorable borrowing climate.

Since taking office in 2012, this Board has spent money carefully, operating on a pay as you go basis to fund smaller projects in the capital improvement plan, which addresses items that have a relatively long useful life and cost more than $50,000.

As part of the overhaul of county finances, the Board of Supervisors adopted policies in 2015 to establish thresholds to prevent the county from getting in over its head. *

A resolution outlining parameters for a lease purchase strategy suggested by staff and financial advisors was adopted by the supervisors at their September 6 meeting following a public hearing, at which no one spoke. County Administrator John Budesky, Board Chair Bob Minnick, and Vice Chair Ned Creasey were tapped to negotiate the final details.

Under the proposed financing strategy, a third party will lease the land from the county and lease it back to the county for an amount to be paid out of the annual budget. This does not create indebtedness for the county. (See the Board packet on the county website goochland.va.us for the documents, and the live stream of the presentation.)

Virginia localities may not issue bonds without a referendum, explained the county's bond counsel, George L. Scruggs, Jr. of Kutak Rock LLC. They may, however, borrow via lease purchase. Scruggs said that vendors, in this case banks, which responded to the county’s request for proposals, view these situations as sound investments because localities are not likely to default on the debt.

This is a legal and reasonable way for the county to finance the communications project, even though it seems a bit convoluted. Although the duration of the arrangement is not expected to exceed 15 years and the interest rate to be no more than 1.93 percent, the resolution uses “not more than” language to give negotiators both flexibility and limits.

Ken Peterson, District 5, whose private sector finance expertise helped the county avoid the fiscal cliff of the TCSD debt, was assured that communications equipment with a relatively short useful life, is funded with shorter term instruments, the remainder, longer term. The lease may be paid off at par value after seven years, or at a 1.03 percent penalty before then.

Many GOMM posts have lauded the Goochland Board of Supervisors for its prudent and open oversight of public funds. Transparency in money matters keeps everyone honest. It also provides the opportunity for citizens to learn how their tax dollars are spent, but only if they pay attention.


*
" Net debt as a percentage of estimated market value of taxable property should not exceed 2.5%. Net debt is to include general obligation, capital leases, and revenue bonds.
•The ratio of debt service expenditures as a percent of total general fund expenditures (including transfers to other funds) should not exceed 12%. While 12% is the ceiling, the capital improvement plan is prepared using a target of no more than 10% of debt service to expenditures.

Fund Balance Ratios
•Unassigned fund balance at the close of each fiscal year should be at least 20% of the total annual adopted general fund budget of the subsequent fiscal year, plus the non-local portion of the school operating fund budget.
•The County will maintain a Revenue Stabilization Reserve of at least 1% of the total annual adopted general fund budget of the subsequent fiscal year, plus the non-local portion of the school operating fund budget"