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Borrowing from the past: County debt strategy has changed

I think even Charlie Grant would be happy with this budget. Charlie passed away a few years ago, but from 1988 to 2002, he represented the town and part of the city of Delavan on the Walworth County Board. Charlie was a frugal man, but his views on fiscal restraint were not always met with universal approval by his peers.

He always was very kind to me, but he never missed an opportunity to grill me when it came to the county’s debt practices. On the night I presented my first budget for the county in 2001, I can still remember Charlie asking me (as it turned out, this would be the first of many occasions), “When will this borrowing end?” With plans to build a new courthouse and an asset list full of deteriorating buildings, I couldn’t answer his question. He knew I couldn’t and his question became a topic of some spirited, but good-natured exchanges between us.

Charlie had a point. At the time, county debt was projected to increase without a clear end in sight. That’s why I wish he was here now so I could tell him, myself, that the borrowing has ended, at least for a while. Barring any unforeseen circumstances or radical changes by the board, the 2013-2018 capital plan that I recently presented to supervisors includes no plans to issue debt.

I don’t know for a fact, but I suspect Charlie paid for most things in cash. His generation did and I think the country was probably better for it. They lived by a couple of simple rules. If you want something, save up for it. If you have to borrow, make sure it’s for something that will last for a long time after you make the last payment. Over the years, I think our county lived by this credo. That’s not to say that our supervisors didn’t borrow money. County Board Chair Nancy Russell, who collects antiques when she’s not sitting in meetings, has unearthed a variety of road and drainage district bonds dating back to the 1920s. One borrowing that always amazes me was a $3.25 million bond issue in 1919 to construct most of our present-day county trunk highway system. That’s not an insignificant issue, even by modern standards. In 1919, however, it was nothing short of a leap of faith. At a time when it cost a couple of hundred thousand dollars to run the whole county, it is difficult to imagine that voters approved that level of debt. Whenever you drive on a county road, thank them for their foresight.

I ran across another bond issue in 1906. This one was for $35,000 to build a fireproof county office building. I don’t know what happened to the previous county office building, but I do know a few things about elected officials. I’m guessing the old building burned down.

Like the rise in consumer debt, the nature of government borrowing practices changed significantly in recent years. In 2000, our board took the easier of two paths and issued $7.2 million in bonds to fund a number of projects that would have been paid for with tax levy dollars in previous years. A portion of that issue included our road reconstruction program. That move took advantage of a loophole in state law that exempted debt service from levy limit caps. Paying for roads with borrowed dollars freed up tax levy money for current expenses, like meeting the payroll.

I can sympathize with the dilemma faced by the supervisors at a time when they moved our road program off the tax levy. Avoiding the bond issue that year would have meant cutting millions out of the budget. The decision to infuse those borrowed funds into the county budget, however, couldn’t have come at a worse time. Just a few years later we were issuing debt to replace buildings like the courthouse, nursing home and Lakeland School. These building projects were the kind that the county historically paid for with bonds. It was challenging enough to repay all of that borrowed money without having to worry about the highway debt.

In more recent years, the board has taken two steps to get a handle on its debt situation. First, it held the line on spending by adopting its own tax cap. Unlike the old state tax cap, this one included debt service in the calculation. Our “self-imposed levy limit” necessitated cuts to the operating budget, the kind of cuts that should have been considered in 2000. Secondly, the county aggressively prepaid its debt whenever the opportunity presented itself. These strategies have put the county back into the position of paying for its roads with tax dollars, rather than borrowed funds. The proposed 2013 budget, which I recently presented to supervisors, calls for the prepayment of another $2.6 million of debt next year, but more importantly, plans for no borrowing in the next five years.

Debt isn’t inherently evil, and there are times when it makes good sense to take out a loan. Using debt as a replacement for fiscal self-discipline, however, carries its own punishment. It makes budgeting easier in the short term but defers and amplifies the tough choices that must be made when the bill for all of that borrowed money comes due.

You can follow the county’s 2013 budget process online at www.co.walworth.com or in person. A public hearing on the spending plan is scheduled for 6 p.m. Oct. 30 at the Walworth County Government Center in downtown Elkhorn.