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Debt, less revenue big factors in Butler County’s budget woes

Borrowing during boom times before 2008 has left county in debt as sales tax revenue falls.

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By Michael D. Pitman, Staff Writer 9:37 PM Saturday, December 25, 2010

HAMILTON — One could argue that much of the blame for Butler County’s financial woes can be placed on the embattled U.S. economy.

Around 2008, the economy took a sharp turn downward. Sales tax receipts can support that locally. The county is down 0.5 percent from 2009 while neighboring counties are up at least 2.5 percent.

In an e-mail to the county commission, Office of Management and Budget Director Pete Landrum said part of the reason is Cincinnati Premium Outlet.

“Butler County residents have taken their tax dollars across the border into Warren County and/or other county residents are coming into Butler County less for shopping,” Landrum wrote.

Warren County sales tax receipts are up 6.8 percent from 2009.

The national economy is still to blame for many problems, including Butler County’s projected $7 million 2011 deficit.

From 2008, sales tax receipts have dropped 19 percent (granted there was a 6.5 percent rate in 2008 and it is now 6.25 percent). Property tax revenues have dipped 8 percent from 2008. Interest on investments has dropped 73 percent from $9.25 million in 2008 to a projected $3.52 million for 2010 — a $6.75 million difference almost equal to the projected 2011 deficit.

Until the economy went south, Butler County was one of the fastest-growing counties in the state. County revenues increased from about $61.8 million in 2000 to nearly $96.5 million in 2008. Expenditures went from $61.6 million in 2000 to $94.7 million in 2008.

And during the financial growth, the county commission borrowed money for projects such as fiber optics systems, road improvements, the new jail and the Government Services Center.

Today, Butler County has upwards of $91 million in debt.

Commissioners in political pickle

Tea party supporters and other residents criticized commissioners for considering a proposed 0.25 percent sales tax increase to fill the gap. Then when the Commission elected to make spending cuts instead, supporters of the sales tax idea voiced their disapproval.

The three-man board has also taken hits for not being tough enough when it comes to controlling the county’s spending. In fact, one of its own members, Commissioner Greg Jolivette, penned a letter to Commissioner Chuck Furmon and then-Commissioner Michael Fox in 2006 accusing the board of “spending money like a drunken sailor.”

Jolivette’s letter also mentions a warning from Moody’s, a credit rating agency, to commissioners that said, “If we do not take steps to replenish our reserves, we will receive a downgrade.”

With a multi-million dollar deficit looming in 2011 — which Butler County legally cannot have — the threat of credit rating downgrade may be a little more real.

The County Commission is expected to vote on a budget, which is most likely a one-month budget for January, at its Dec. 30 meeting.

Even though there is a proposal by the Office of Management and Budget on cutting the $7 million projected shortfall for 2011 nearly in half, exactly how the county will get to a balanced budget won’t likely be known until after Commissioner-elect Cindy Carpenter takes Jolivette’s seat Jan. 3.

But whatever is done, Commissioner Don Dixon said it cannot be business as usual, but rather business as it should be.

“It’s going to be difficult, it’s going to be difficult all over,” Dixon said. “But it’s not impossible.”

A second look

Jolivette said it’s unfair to play “Monday morning quarterback” with the Commission’s decisions in recent years.

“You need to be there at the time the contract was signed to see what was available,” Jolivette said. “And you can’t use the economic times that we’re in now to say, ‘Look at what you can get it at now versus what you got back then.’ Times were different and prices were different.”

Jolivette said the county’s reserves had increased to $14 million before the economy tanked. As a result of the poor economy, those reserves have been tapped into for the past three years, he said.

County Auditor Roger Reynolds have been a constant voice in commissioners’ ears since been appointed to his post in 2008. He said he is concerned about the budget because the county has a “spending problem.”

“My concern for the 2011 budget is to ensure we have spending below revenues, approved spending below estimated revenues,” Reynolds said. “I have a significant concern that over the past two years we’ve continued to spend more reserves than we should be as opposed to cutting the expenditures.

“And now we’re in a position with fewer options than we would have, had we been more disciplined over the past couple years in cutting expenditures.”

Reynolds said he’s done more than voice his concerns; he’s tried to lead by example. Since taking over the auditor’s office, Reynold’s has cut the department’s budget by 35 percent.

What’s next?

Balancing the county’s budget will require some hard decisions about what is to be cut.

By year’s end, commissioners will likely adopt a one-month budget for January. County Administrator Bruce Jewett said commissioners hope to have the 2011 budget approved by the end of January.

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