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Augusta rainy-day funds diminish

Saturday, March 22, 2014 7:15 PM
Last updated Sunday, March 23, 2014 1:33 AM
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Augusta’s rainy-day fund made the news again last week as the Augusta Commission reached in for about $900,000 to allow the Richmond County sheriff to avoid a countywide 2.4 percent budget cut.

The general fund balance, a measure of the city’s solvency, has teetered in the $20 million range over the past decade but last week apparently dipped to $18.2 million, after two years of using it to balance the budget and cover the sheriff’s office shortfall.

The fund, often characterized by how long it could maintain government operations and meet obligations after a catastrophic loss or large unforeseen expense, could now sustain the government for about six weeks, Finance Director Donna Williams estimated.

The amount a city should keep in its fund balance isn’t “carved in stone,” she said, but anything over a month is considered outside the “shoestring” range.

“The broad recommendation is 30 to 90 days,” she said. “Internally, we aim for 60 to 90 days.”

The current balance does not mean Augusta has $18.2 million sitting in a bank account – rather, it’s the difference between all assets and liabilities in a governmental fund.

The amount is a critical component of the city’s audited annual financial report and is used heavily by rating services to gauge the credit worthiness of city bonds. For the same reason, city officials only provide estimates of the fund until the annual report is completed, six months after the fiscal year ends.

The average cost to operate Augusta’s government is about $392,000 a day.

The general fund is used to cover most ordinary government operations, from recreation and maintenance to the sheriff’s office. Not included are those departments that occupy separate enterprise funds and are expected to sustain themselves, such as Augusta Regional Airport, waste management, water and sewer and Augusta Municipal Golf Course.

Rather than cut the budget, raise taxes or otherwise increase revenues, commissioners have taken from reserves every year since at least 2008, when the available fund balance stood at $28 million, to balance the budget, a requirement under Georgia law.

Commissioners dipped into reserves in 2009, 2010 and 2012, but cost savings elsewhere replenished what they took out.

Williams said the sheriff’s office won’t be the only department not to meet budget and expects “there will be some use” of the fund this year.

Unforeseen and foreseen expenses can take a toll on the general fund balance. A new state tax exemption for energy used in manufacturing, for instance, will cut $10 million from the operating budget by the time of its fourth year of implementation in 2016, according to city estimates. A commission effort Tuesday to replace the lost energy revenue through a new excise tax, and use the money to cover the sheriff’s shortfall, only had three supporting votes.

The estimated cost of cleanup from last month’s ice storm has risen to $16.1 million, though the city expects the Federal Emer­gen­cy Management Agency to reimburse Augusta for the cost, as long as the debris hauled and work done meet heavily audited guidelines.

Barring significant service cuts, a tax increase or a dramatic shift upward in the tax digest, Augusta’s general fund balance could continue to dwindle until current liabilities exceed expenditures.

Commissioner Wayne Guil­foyle, who heads the commission’s Finance Committee, said the shrinking reserves are cause for concern.

“It’s always concerned me for the past three years and three months,” Guilfoyle said.

However, few commissioners attended scheduled budget meetings last year, most bucked efforts to trim budgets and the body as a whole declined to approve former City Administrator Fred Russell’s suggestions for cutting costs or raising revenue.

“I warned them we were spending money we don’t have,” said Guilfoyle, a flooring contractor. “I know how not to spend money I don’t have.”

BY THE NUMBERS

• The Augusta Commission took out $900,000 of the rainy-day fund so the Richmond County Sheriff’s Office could avoid a budget cut.

• The fund, which is normally around $20 million, dropped to $18.2 million last week.

• The average cost to operate Augusta’s government is about $392,000 a day.

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Little Lamb
49257
Points
Little Lamb 03/22/14 - 10:20 pm
2
0
Oh, Boy

From the story:

The current balance does not mean Augusta has $18.2 million sitting in a bank account – rather, it’s the difference between all assets and liabilities in a governmental fund.

This is disconcerting. If the city’s reserve fund is not in a traditional bank account, but instead is in some “fund,” who is the financial adviser running the fund? Is he investing it in junk bonds? Is he investing it in hedge funds? Is he playing the stock markets?

What is fee for the financial adviser?

Thank you, Susan McCord, for opening this can or worms. I'm sure we are all sleeping easier tonight.

:-0

Little Lamb
49257
Points
Little Lamb 03/22/14 - 10:21 pm
1
0
Speaking of junk bonds . . .

Even worse, could the financial adviser be investing taxpayer money in city of Augusta municipal bonds? That would be a scary thought.

Riverman1
94310
Points
Riverman1 03/22/14 - 11:27 pm
0
0
"Fund" Does Sound Scary

LL, below is the line that has me scratching my head. Yeah, what and where is this "fund?" Are some assets property the city owns?

"The current balance does not mean Augusta has $18.2 million sitting in a bank account – rather, it’s the difference between all assets and liabilities in a governmental fund."

corgimom
38761
Points
corgimom 03/23/14 - 08:21 am
0
0
No, LL, in governmental

No, LL, in governmental accounting, there are "funds". It's an accounting thing. It's similar to for-profit accounting, where net income on an income statement is not the same as money in the bank.

The amount in the fund is assets- liabilities, and has nothing to do with how much cash a municipality has.

Governments do not issue stock or have retained earnings, which is why they have "funds".

soapy_725
44151
Points
soapy_725 03/23/14 - 08:52 am
0
0
So governmental properties acquired could raise the differential
Unpublished

in name only. Real assets less real liabilities.

soapy_725
44151
Points
soapy_725 03/23/14 - 08:53 am
0
0
This is why ARC is acquiring property. Smoke & Mirrors.
Unpublished

This is why ARC is acquiring property. Smoke & Mirrors.

soapy_725
44151
Points
soapy_725 03/23/14 - 08:54 am
0
0
Condemn property. Take property. Reappraise property upward.
Unpublished

Condemn property. Take property. Reappraise property upward.

dichotomy
37644
Points
dichotomy 03/23/14 - 11:55 am
0
0
I know what the liabilities

I know what the liabilities in Augusta/Richmond County are and most of them are elected. They cannot balance a budget, they continue to spend money we don't have, they obligate tax revenue to ridiculous redevelopment projects that go broke because of poor oversight, they approve projects and incur interest payments on bond issues before they have a revenue stream to pay for them. Yes, I am WELL AWARE of what the liabilities are in this county. The might as well hang a sign over the commission chambers that says "We Are The Government And We Are Here To Bankrupt You".

Brad Owens
4922
Points
Brad Owens 03/23/14 - 05:27 pm
0
0
'Loss Leader Strategy'???

Maybe it's a 'Loss Leader Strategy' to try and get business, industry and citizens to move in?

Brad

corgimom
38761
Points
corgimom 03/23/14 - 07:37 pm
0
0
No business wants to move in

No business wants to move in to a failing municipality. They won't have the infrastructure that they need to successfully operate.

Sure, let's cut the sheriff department. Inadequate police force, yeah, that'll make people and businesses flock to Augusta!

corgimom
38761
Points
corgimom 03/23/14 - 07:44 pm
0
0
2013- Total cases- 25,253

2013- Total cases- 25,253

Total arrests- 4886

A criminal in Augusta has an 81% chance of not being arrested, and people want to CUT THE SHERIFF"S DEPARTMENT??? Are they crazy???

Why wouldn't a criminal commit a crime, between their low likelihood of arrest, and being able to plead down, they would be STUPID to stop committing crimes!

Brad Owens
4922
Points
Brad Owens 03/23/14 - 09:32 pm
0
0
It was a joke...

You know, a JOKE?

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