Stanly County has 40 Million in the Bank?

There’s been this rumor running around Stanly lately as campaign season fires up that seems to be centered around the misconception that the County Government, or more specifically the Board of Commissioners, is sitting on 40 million dollars in the bank and that there’s just no reason for that kind of money to be sitting there when there are so many things that could benefit from spending it.

To begin with, that’s an asinine statement and I can’t think of any sane reason that a business-minded person wouldn’t understand the difference between the amount sitting in their checking account and the amount they actually have available to spend.

Well, that’s not exactly true. There are two reasons that immediately come to mind:

Either you don’t know how a business or finances work in the least, in which case you shouldn’t be talking about them in the first place.
Or you know full well how it works and you’re hoping to leverage votes by just trying to twist the facts because you know the average taxpayer isn’t going to work hard enough to know you’re full of it.

The county itself, its department heads and staff, doesn’t have a voice to come out and say “Hey, that’s not right” so it appears it’s left to me to do it, and that’s fine. I don’t mind explaining things to anyone that asks. I just REALLY wish they’d make a phone call and ask before just making assumptions and hurling them at people.

I run a business. My wife runs a business. Thousands of our taxpayers out there run businesses as well, so I’ll put this in business terms any person with an 8^th grade understanding of handling money should be able to relate to.

To begin with, no sane businessperson out there would look at their checking account balance as a guide on how much money they have available to spend! That is literally the opposite of how to manage money!

I’ll give you a very simple scenario.

Your business has 100,000 in the bank when you login to your online banking to check.
You run a company with 30 employees and your average payroll cost for that week including gross payroll, state taxes, 941 taxes, and benefit programs is 35K that’s coming out every Friday.
You know your mortgage on your building is 10K a month and that’s coming out on the 1^st of the month.

Knowing ONLY that, how much money do you actually have to spend if you don’t have ANY other responsibilities in the world?

What would happen to your business if you spent 100K on projects you really wanted this week?

In case you can’t math (to borrow a phrase from my kids), the answer is you’d be out of business by the middle of next week. You don’t have 100K to spend. You have about 55K to spend, about half of what you have if you had relied on your bank balance as a guide on how to spend money. I think most of us quit doing that at about 18 years old when we bounced our first check, right?

Personally, I’d be OK if people were attacking these numbers after doing some research, but they haven’t. Not a single person has called any of us commissioners to ask about the facts behind the numbers. None of them have called Andy Lucas to break it down for them. None of them have called our finance department to ask questions. They just spout account balances without spending one second trying to figure out how those balances are calculated and what they’re for.

Stanly County’s Real Numbers

So let’s dig into the actual numbers Stanly County has to work with and how they truly play out.

We have what’s referred to in government as a “overall fund balance.” It’s basically all monies we have in various accounts added up together to come up with the number that equals all our cash accounts combined. As of December 2021, that number is currently $40,057,076 ($40 million).

Right off the top of that 40 million, a total of $9,551,115 (call it 9.5 million) is unavailable to be spend because it’s classified unspendable or reserved by NC General Statutes, so we can’t touch that at all.

So we’re down to $30,505,115 ($30.5 million). We literally haven’t gotten down to spendable money yet and we’re already down 9.5 million.

Next are what government calls capital projects. If this were your small business, you’d consider these things like a new service van, or the money to build a new warehouse or new office space your business needs to maintain whatever services you offer, or money you’re saving to invest in a particularly expensive piece of equipment or tool.

I’ll use my own experience from my wife’s business. One piece of Xray equipment can cost $100,000. No one has that floating around so you’ve got to save for it over a couple years, or at least save enough that you can finance the rest and make reasonable payments.

As a business owner, from time to time you borrow money, but when it makes sense for your business to do so you’d choose to set aside money for a few years so you can spend that saved capital instead of paying interest on higher loans, right?

In the county’s case we already have $563,270 of that budget committed to capital projects and another $4,988,300 ($4.98 million) assigned to specific programs and services. For example, we have the Sheriff’s office drug forfeiture fund, the Dental Medicaid escrow, the tax revaluation reserve, the library endowment, etc. This 4.98 million can only be spent on these specific program areas because we’ve already committed to them or we legally have to spend the funds for those specific programs/services. Even though the money is in the bank, we can’t simply “steal” it from one program to give it to another. (If you want a breakdown of how the forfeiture fund or dental escrow works, I’ll be glad to tell you but I don’t want to go into all that here. It’s not germane to the topic.)

After the money we can’t touch due to statutes and and committed capital projects, and other untouchable funds, we’re down to $24,953,545. ($24.9 million). This represents 34.64% of the County’s FY 21-22 expenditures for the entire calendar year – what we call the “annual budget.”

So, of the 40 million someone is yelling about, it would have taken someone exactly 2 minutes to figure out that we only have 24.9 million of that not already accounted for.

The County’s Ability to Borrow Money

I’m going to use another business analogy here because not everyone understands bond-rating agencies and the like, but we all understand the value of having a good credit score, right? (Trust me, if you’re too young to appreciate a good credit score now, you’ll agree with me in ten years!)

So… you’ve got a budget of about 80 million dollars, and you know you’ve got a lot of new stuff you’re going to need for your business in the upcoming years. You’re going to need new cars for your service industry, or need to buy new expensive tools, really expensive ones, so you’re going to have to apply for a loan or a line of credit with a bank or credit agency. As business owners, most of us have successfully learned how to manage our credit lines to know how to make our credit score look good. If you’ve got no money in the bank and you want to borrow a million dollars, do you think someone’s going to give it to you? Of course not. You’ve got no credit and no money. Why would they give you anything? And even if they WOULD give it to you the interest rates would be painfully astronomical!

I can attest to this one personally. I ruined my credit right out of college. It took me until the time I was 40 years old to hit an 800 credit score and it was downright PAINFUL to accomplish. I’d share the story of hiding my Jeep from the repo man in a storage shed, but most have already heard that one.

You’ve got to keep a debt ratio of about 25% or less, but you need to also be USING approximately 30% of your available credit to show banks that you’ve got a good history of being able to pay it back on time. Does any of this sound familiar to any business owner out there? I mean literally…if you have credit lines that are completely paid off, it actually HURTS your credit score!

Well, government is in the same boat. Remember, we ARE a business. We truly are. There are two ways for us to do new stuff for our customers (voters and taxpayers).

Save money, have great credit, get great interest rates on loans.
Charge customers more for the product (raise taxes).

That’s it.

My assumption is that taxpayers do NOT want us raising taxes. Am I wrong in that assessment?

Unlike regular business owners we’re not allowed to invest taxpayer money in certain higher risk investment tools. It would be nice if we could! I’d love to take 10 million of our reserves, invest it wisely, and double it in four years, but there are very specific laws on how local governments can invest taxpayer money, and that’s probably a good thing! You’re not allowed to put taxpayer money “at risk.” So fine, no investing tax dollars.

We’re back to having to maintain a good credit rating. To do that there is one general rule. Bond rating agencies, banks, and other lending institutions look for counties our size to maintain at LEAST a 25% unassigned General Fund balance reserve. To put that in the simplest terms, if your budget is 80 million a year, you’ve got to have 20 million in reserve sitting there that you don’t touch. That’s what makes a bank confident you can cover your debts and be willing to take you on at a good interest rate. (Yes, if you want to borrow money, you already have money. I wish I knew THAT back in the high-school and early college years.)

Don’t’ get me wrong… we CAN get loans if we go below that number, but it’s going to cost us a much higher interest rate that that comes directly out of taxpayers pockets. That means we’d be making the same each year but would have less money to spend on new projects because we’d be spending a chunk of that on higher interest payments – and when you’re taking out 30 million dollar loans, you REALLY care about that interest rate!

So let’s do that math again from the top:

What we have in the bank? 40 million
How much can’t be spent by NC statute? 9.5 million.
How much have we already promised to other projects or must legally spend on certain programs? 5.2 million.
How much do we need to leave in the bank minimum for our credit rating? About 18 million.
What’s left? About 6.9 million

So we can spend 6.9 million, right?

Wrong.

Wait, what?

Yeah, I know, right? Check this shit out. It gets even better.

So you know now what we have to have as a MINIMUM in the bank to have good credit right?

And keep in mind that by good credit, I mean Stanly County currently has such good credit that we can go borrow 30 million dollars at danged near 0 percent interest. I’m assuming that everyone out there reading this likes that fact. Otherwise we’re blowing more taxpayer money on interest, which does nothing except make a bank fatter and us poorer.

So that’s what the BANKs want… but we have another little wrinkle to deal with as well. That’s called the LGC.

The LGC (Local Government Commission) was formed WAY back in the 1930s under NC General Statute 159-3. It was formed because way back then some 200 local governmental districts in NC as well as 62 counties and 152 cities were in default on their loans. Basically, a bunch of people a century ago couldn’t handle their finances and a freaking century later we’re all still under their thumb!

Basically, as a unit of government, we have to seek LGC approval before borrowing money. So even though we have a great credit rating with bond agencies and banks, we ALSO have to have a great rating with the LGC, or they can literally tell us “Umm, no. We don’t think you need to borrow that x million dollars for that XYZ project.”

I said before that the banks require a 25% minimum fund balance, but the LGC requires even more. It basically looks at your peer counties to see what they’re doing and then makes you Keep up With The Joneses. Why? Because they can.

So let’s say they compare us to 5 random counties:

County A keeps a 28% fund balance
County B keeps a 35% fund balance
County A keeps a 34% fund balance
County A keeps a 39% fund balance
County A keeps a 32% fund balance

The average of those counties around us is 33.6%, (using imaginary numbers here) so even if we maintain the 25%, we’ve still got to maintain another 8.6% to pass their grading scale and to continue to be able to borrow money. So even though we DO have 6.9 million to spare, we really don’t have 6.9 million to spare.

Want to have your mind blown a little more? One of our “peer” counties is Cartaret County, a coastal county. Due to the severe damage that can happen in coastal communities, they have to keep their percentage higher than we do here in the Piedmont, yet we’re “graded” within that same group, so Stanly has to keep more money in its coffers according to the LGC if we want to be able to borrow money for projects….all because the east coast gets nor-easters. Go figure.

Note: If you want to read more about the LGC, you can here:
https://www.nctreasurer.com/state-and-local-government-finance-division/local-government-commission/

Now what?

I hope you have a more clear idea of why we have to maintain a certain balance in the accounts based on our budget . If any of that is unclear, call or email me and I’ll be happy to explain it in more detail where possible. (Keep in mind we have an entire finance department that does this. I’m just breaking it down Barney-style for you).

So let’s go back to that 6.9 million we theoretically could spend. I mean it’s not much, but it is almost 7 million dollars. We can do something with that, right?

Sure… but not budgetary items. Let me explain the difference.

Capital Expenditures vs Recurring Budget Items

Capital Expense: Things you buy one time
Budget Expense: Things you pay for each year (requires a tax increase)

So if we want to build a new EMS base for example. That was a capital expense that we just completed recently. That was 2.3 million dollars but we won’t need another one for 20 years there hopefully so it’s a one-time expense. Fine. Spend the excess on that.

The agri-civic center needed new lights the other year. That was $128,000 for new LED lighting to replace the old sodium ones that were costing us a fortune in cooling costs. (You’re welcome for that one by the way. That had been on the capital improvement plan for the last ten years until I threw a hissy fit to just write the damned check and get it over with).

That’s the kind of thing you spend that money on.

Buy a vehicle.
Build a building.
Fix a roof.
Upgrade police radios.
Repair an HVAC unit, etc.

You do NOT spend that money on recurring expense!

If our budget is 80 million and you decide to… let’s say give some department a pay raise. That’s certainly what some people would want us to do, and I get the sentiment.

Ok,let’s say that pay raise across the entire department you’re talking about comes to 1 million a year total . Here’s what’s going to happen.

If you use general fund money, you’re going to give some department a raise for 6 years and then about mid-October of the sixth year that money is gone. Are you going to take their raise back? I mean that’s your only solution. Either that or you shut down the library and the agri-civic center and permanently move that capital improvement money to pay for those salaries.

No, you BUDGET for new raises and recurring expenses (such as software costs, etc) and those go in the annual budget. Now, instead of an 80 million dollar budget, you’ve got an 81-million dollar budget

That means you have two choices:

Raise taxes 2 points (that would add almost 1 million dollars a year in revenue)
Shut down 1 million dollars in other programs that are also recurring revenue. (Library, Senior Center, etc)

You absolutely DO NOT EVER spend general fund balance (one time money) on salaries or recurring items, not if you want to maintain your budget and not raise taxes the next year unless you have some recurring revenue source to pull it from (or you have some other wizardry available to you where the stars have aligned just correctly for you to temporarily fund something for one year until a promised recurring revenue stream arrives to cover it, but that’s a huge risk).

What we generally do with county finances is called the Pay-as-You-Go model, or sometimes just the Pay-Go model. You spend money on one-time capital outlay items such as new facilities or major renovations versus borrowing for these kinds of programs which leads to more debt and more interest payments. In short, rather than finance 12 million, you pay 6 million down NOW and only finance the other 6 for less time at less interest.

As a board of commissioners, myself (and all the commissioners that serve with me and whom have served before me) have what we call a strategic capital improvement plan. (Sounds fancy doesn’t it? It’s basically the government version of a honey-do list, just a shitload more expensive.)

Well, over the next 1-2 years we’re absolutely going to have to improve some programs to keep up with the growth and the service demands in Stanly County. Those things are in our Strategic Capital Improvement Plan. It currently includes things like the new Sheriff’s office, the new 911 Center and Emergency Operations Center, the Livestock Arena, etc.

The cost of those three programs alone is going to be more than 15 million dollars. To decrease the amount of money borrowed for these projects and the associated long-term interest it would cost our taxpayers, we have committed to a Pay-Go model for a portion of these projects. So…. THAT is where the other 6.9 million dollars is already slated to go…to build these new facilities in the next 12-18 months.

In short (yeah, I know, too late) the county has positioned itself to save our taxpayers significant long-term interest costs by setting aside sufficient reserves to use a Pay-Go construction model vs. taking on more long-term debt.

So, no… we don’t have 40 million floating around. We’ve got very little floating around spare, and we’ve allocated it where it needs to go to keep up with the services Stanly County is going to need in the very near future. Some things, such as the Sheriff’s office and 911 center will never make the county a dime. They’re just things we must expand on as the county grows.

There are other projects that have the same issue – they HAVE to grow along with us. A good example is the water treatment in the West end of Stanly County. This comes out of the Enterprise fund, not general fund, but it’s closely tied to the other fund because if you screw up one, you can screw up the other through the law of unintended consequences.

We literally can’t build any more houses out in the west end that are served by the west-end wastewater treatment plant until we expand the water treatment capacity. That’s going to cost money. We’re going to budget to spend what we can when we’re done with the Sheriff’s office and 911 center and Livestock arena, manage it responsibly, and finance the rest.

How much money does it cost to clean wastewater? Well, the existing upgrade from 900,000 gallons per day to 1.2 million gallons per day (mgd) cost about 5 million, but we’ve got to immediately start the process to get to 5mgd and guess what that price-tag is going to be? A whopping 30 million dollars as of the last time we had a meeting about it…

There’s going to come out of the Enterprise fund, but its one more example of the growing needs Stanly County has that the administrative staff and the commissioners have to manage.

Other things, such as the Livestock arena can bring money INTO the county. It will bring people into the county traveling, spending money in local stores, local restaurants, and local hotels. So those are good things we need as well. If we don’t want to raise taxes, we need to find ways to make Stanly attractive to people that will spend THEIR money here rather than spending all YOUR money out of your pocket in taxes.

So we’ve got things we have to spend that don’t make the county money but are required, then we have the occasional thing we can try to do to bring money INTO the county, and then we’re eventually going to have to have the decision on a school building. At some point the school board will come to our board… it might be next year or it might be seven years from now, but at some point someone is going to come to us and say “We’ve all agreed. We need a new school building.”

Well, if that’s an elementary school, the going price tag is about 15 million dollars. If it’s a middle school, the price is about 50 million dollars. If it’s a high-school….. that price tag will cost Stanly County about 100 million dollars for ONE building.

So in addition to what we’re managing for today, we’re constantly trying to look down the pipe to the future to be aware of what the next year or next couple of years is going to bring and then do our damnedest to come up with a plan to be ready for it.

So Drop The Mic… and Pick Up The Phone.

As much as I like all the flag-waving BS that’s been floating around lately, it would be really nice if people that want to yell about how we’re spending money would spend five minutes on the phone actually learning where the money goes and why BEFORE posting stuff they have no understanding of on social media or the radio.

Our county budget is an open book… literally. No, seriously, it’s a 151 page book posted on the Stanly County government website! You can read our ENTIRE budget every year…. It’s public information.

A personal note from me:

Maybe you know and maybe you don’t, but at the time of this writing, I’m blessed not only to be a county commissioner, but to be the chair of county commission. It’s a huge responsibility but it’s also a huge honor!

If you’ve got a question about county government, call the county office at 704-986-3600. Someone there will likely be the MOST educated about the questions you’ve got, but if you don’t get the answer, you want or don’t understand the answer, tell them you want to talk to me (or any particular commissioner you might want to speak to).

They’ll email me your contact info and I will call or email you back about your issue. And I’ll be clear here… I don’t care if you’re a voter, a candidate running for office, or even the guy running against me for my own office on the board… being good stewards of this county’s tax money is our job. It’s literally what I am paid to do. So if you have a question about it, I’ll find you the answer.

Depending on the week it might take me a bit to get back with you about your question and I’d definitely prefer if you went through the proper departments first, but… if you can’t get an answer on something, ask me.

That’s the only way I learn new things as well. You think I have all these answers to all these questions in my head? Hell no! I’ve been doing it for four years day in and day out, so I’ve picked up a little here and there I’d like to think, but I DO know the right people to call to get you the answer and I normally know how to break it down for those that don’t breathe government finances day in and day out.