By Ernie Colburn, CEO – SACC
On April 10th, County Executive Rick Pollitt and his administration held a Public Input Meeting at the Wicomico County Youth and Civic Center here in Salisbury. This was an opportunity for the public to offer input on proposed budget for the next fiscal year and express their pleasure or displeasure for specific items.
As always, several special interest groups were present to pitch their need for funding at a level of what’s been requested or more. I might say, all present presented comments on many worthwhile projects for our community.
Towards the end of the parade of speakers coming forward to present their case, I felt compelled to speak realizing one key item has not been mentioned and probably most of those in the room didn’t think about or simply didn’t understand the economics to offer comment.
Specifically one slide was dedicated to the County’s Fund Balance and a proposal to spend down some $7 million dollars most of which is for “non-recurring” projects. Some attendee’s did mention the County having a piggy bank of some $39 million dollars and wanted some of that money for their projects. What most in the room didn’t realize is this is the County’s “security blanket”, our hedge against higher interest rates for funding Capital Improvement Projects through borrowing.
What most in the room didn’t realize too is the volatility of our current interest rate on Wall Street considering the roller coaster ride the market is taking these days. Playing with this fund could jeopardize our current interest rate. The slightest deviation could cost the County and its taxpayer tens of thousands of dollars in increased interest paid not just in one year, but it could take “years” to recover our current rating. The County’s current double-A credit rating is a superb rating. The reason we have that rating is the “security blanket”, namely our $39 million dollars in the Fund Balance.
That being said, we recommend the following procedure be followed this year and in future years:
- Contact our Bond Rating Companies in New York in advance of actual spending to get their input
- Will this spend-down ($7 million dollars) effect our bond rating?
- Will this spend-down gamble be outweighed by the improvements we deemed absolutely necessary to maintain a lifestyle in the County?
Spending down the Fund Balance and subjecting us to higher interest rates on borrowing money with fluctuation will come straight off the “top of the budget” resulting in less dollars to go around for special interest groups or budget line items.
In conclusion, we need to thoroughly think this through before we potentially jeopardize our bond rating. As I mentioned in my brief talk at the County Executive Public Input Meeting,“ the Chamber respectfully requests that the County leadership and County Council protect and maintain our bond rating at all costs”.
