Walworth County Government Today: Staying out of debt

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Dave Bretl | April 17, 2017

I warned you that my column on debt was going to be a two-parter. My last column explored some of the reasons why Walworth County amassed over $50 million of debt between 2000-2010. The debt was taken on for two main reasons:  to renovate or replace buildings that had been allowed to deteriorate for many years and to repair our highways. A common theme of both causes of borrowing was a lack of careful planning. In the case of our buildings, the county board had been mired, for many years, in indecision over the location of the county's courts as well as the future of programs such as our special needs school and nursing home. There weren't enough votes to approve the construction of new buildings. On the other hand, many Supervisors were loath to spend money on repairs; reasoning that the funds would be wasted if new buildings were constructed or if the county ended a program such as skilled nursing care.  As a result, maintenance was often deferred and relatively minor building issues became major ones over time. The board's strategy with respect to highway reconstruction was problematic, as well. To take advantage of a loophole in state-mandated tax caps, the decision was made to borrow money for roads rather than pay for our highway program with current tax levy dollars. When decisions were finally made to build a new judicial center, special school and nursing home, we embarked on a very ambitious building program. The amount of debt service that we needed to pay on all of this borrowed money made it impossible to move the highway program from borrowed to current funds.

As I reported in my last column, this chapter in county history is reaching an end. The county has modern and efficient buildings and was able to end borrowing for roads and bridges in 2012. If the board chooses to do so, county government can be debt free in 2019. As the date of our mortgage burning party approaches, we have taken some time to adopt new procedures to allow future boards to stay out of debt. Three themes have emerged in these discussions.

Borrow only when necessary. The First Law of Holes states that when you find yourself in one, quit digging. With the capacity to borrow up to $682 million, the county will increasingly find itself the target of individuals and organizations seeking funds or financial guarantees for their own projects. When we were heavily in debt, it was easy to decline these overtures by turning our collective pants pockets inside and explaining that we were broke. Future boards will not have the excuse that the county credit card is maxed out. They will need to have the discipline to say “no.” To provide some direction to future boards, in March, Supervisors approved an ordinance making some obvious but important observations about debt such as “borrowed money needs to be repaid with interest” and constitutes a tax that will be imposed on future taxpayers. It establishes seven criteria that must be considered before issuing bonds, including searching for alternative funding sources. It explains that “rent-to-own” arrangements typically include a finance charge and require that a “capital lease” to acquire a large piece of highway equipment, like a tractor and trailer, be subjected to the same scrutiny as the decision to purchase the same piece of equipment.

Planning. A good way to stay out of debt is to ensure that we have a handle on our building maintenance and infrastructure needs. Replacing roofs and mechanical systems and upgrading technology in our buildings needs to be a systematic and constant process. Those needs must be considered along with all of our other responsibilities at budget time. Last month, we reviewed the results of a comprehensive inspection of our Lakeland School. Years ago, it would have been a source of conflict to commission a study on a building that was less than ten years old.  Today, the report was calmly received as a planning tool. Some repairs need to be made, while others are ten or more years in the future. That document will allow the board to set aside funds each year so when we need a new roof, we can replace it without taking out a loan.

Trust. A final factor that the board needs to keep in mind as it sets aside funds to replace and renovate buildings is trust. Most taxpayers that I talk to understand the desirability of setting aside money for future expenses. They become very skeptical, however, when leaders cannot articulate the purpose for which the money is being saved or when money saved for one purpose is used for another. Wisconsin's raid on its segregated transportation fund a few years ago comes to mind. Our supervisors have been very good about leaving these funds alone, an idea we often reinforce by calling these accounts “lockboxes.” While this is admittedly a very non-accounting term, the image it creates is, in my opinion, sound.

While there are clear differences between family budgets and government budgets, there are more similarities than those of us in government care to admit. One book that I have made all of my kids read is Dave Ramsey's Total Money Makeover. Ramsey takes a very dim view about most debt, stressing the need to fund family operations with current income. Government, at all levels, would be wise to consider doing the same.

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