Efficient spending and strong sales tax more than made up for unexpected costs to Polk County in 2018, County Administrator Nick Osborne reported last week.
“If you look at our numbers, the news is good,” he told county board members during his annual report on the county’s financial condition.
The county brought in $1.98 million more than was budgeted and, in spite of some higher-than-expected costs, spent approximately $1 million less than budgeted for 2018.
“That means we had fiscal discipline in our departments and we are pretty good at budgeting and being responsible with taxpayer money,” Osborne said.
The new highway department garage was completed for almost $1 million under budget, and as a department, General Government spent about $1 million less than budgeted.
A chief cause of the increase in revenue was sales tax, which has been growing in the county since 2010.
The Community Services Department was $688,337 over budget, mostly due to increased need for child protective services, out of home placements for children, and other problems related to rising rates of drug use and addiction.
“We have taken steps to get more efficient in that area and it’s encouraging that the state is allocating more money to this area,” Osborne said. “But when you consider the over-under of all the different departments, we’re looking at an approximately $1.8 million increase to the General Fund, which is good news.”
Preparing for recession
Osborne noted that the county should save in prosperous times for leaner ones, as recessions are part of normal economic cycles. At 121 months and counting, the nation is currently experiencing the longest period of economic expansion on record, going back to the mid 1800s. However, the run has seen weaker economic growth than previous booms.
Osborne pointed to one sign of a coming economic downturn, the yield curve inversion. As of June 30, long-term interest rates have been lower than short-term rates for a quarter of the year, historically a sign of recession in the next nine to 18 months.
“It’s hard to have a crystal ball,” Osborne said, “but this is one of those things where you certainly want to keep it in mind.”
The county can prepare for eventual recession by setting its fund balance at the right level. According to Osborne, a healthy fund balance can protect against irregular cash flow and unforeseen costs, protecting the county’s credit rating and keeping programs viable even during a recession.
The fund balance was about $11.78 million in 2018, just shy of 45% of the county’s annual expenditures. That’s comparable to other counties in the area, Osborne noted. Since 2009, the unassigned fund balance as a percent of expenditures has grown from 12.3% to 44.7%.
Budget ceilings have been set for departments for the 2020 budget.
As far as coming capital needs, top priorities include creating a long-term capital plan for the fairgrounds, assessing aging equipment and analyzing security needs at the government center.
The county’s revenue has increased from $51 million in 2010 to $56 million in 2018, which Osborne characterized as “mostly flat.” Tax levy limits, which since 2011 have dictated that the levy can increase only in tandem with net new construction, will stay in place under the latest budget. In 2018, Polk County’s net new construction was 0.8%, half the state average of 1.6%.
According to Osborne, the cap is not realistic in terms of long-term funding for county services.
“A zero revenue growth budgeting strategy cannot go on indefinitely,” he said, noting that aging buildings will require investment in the near future.
The county will have an opportunity to bond with minimal levy impact in 2022, when existing bond levels would drop from $2.4 million to $1.3 million.
• Administrator Osborne noted that the state biennial budget has been signed, with an additional $30 million to help counties fund child welfare issues related to caregiver addiction.
• Jeff Peterson, Town of Georgetown, proposed that the board enact a moratorium on large-scale livestock farms in Polk County. Board Chair Dean Johansen noted that concentrated animal feeding operations are “on the board’s radar.”
• The board approved a resolution to resolve interest and penalties at Green Whey Energy, an anaerobic waste treatment facility. The company is in bankruptcy proceedings and owes the county $1.59 million in real estate taxes. Resolving interest and penalties increases the likelihood that another company would buy Green Whey and pay the delinquent tax principal.
• County staff will develop a resolution toward accepting ownership of the Clam Falls Dam.
• A resolution was approved in support of Telecommuter Forward certification.
• Steve Arduser of Apple River was appointed to the Board of Adjustment.
• A request for proposals went live July 16 for a consultant to help with the Stower Seven Lakes State Trail master plan.