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Report: Butler County has ‘significant’ debt load

State auditor’s office critical of the $91 million owed from general fund.

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By Chelsey Levinsgton, Staff Writer 3:16 AM Sunday, February 5, 2012

Butler County spends significantly more of its taxpayers’ money on debt compared to other Ohio counties.

A 200-page state performance audit analyzed by the JournalNews/Middletown Journal shows the county spends $26,248 per 1,000 residents on debt compared to just $86 for peer counties.

The county’s total payment in 2012 for bonds, notes and leases issued from the general fund is approximately $9.5 million, according to the Office of Budget & Management. Total debt still owed from the general fund is approximately $91 million, according to the county budget office.

Officials from the state auditor’s office were critical of the county in their report.

“It represents a significant expenditure for the county, but it also has an impact on the county’s ability to make expenditure reductions in an effort to deal with declining revenues because their debt service comes out on top,” said Jim Penning, chief auditor, Ohio Performance Team of the state auditor’s office.

Comparably, Hamilton County spends approximately $13,000 per 1,000 residents and Montgomery County approximately $4,600. Warren County has no debt. In the state auditor’s report, it said Ohio counties of a similar population size to Butler County averaged $86.

The county’s debt comes from several large projects funded through borrowing instead of existing resources, according to the financial performance audit. One of Ohio’s fastest growing counties, Butler County outgrew its Government Services Center, county jail and Board of Elections building in the early part of the last decade. Commissioners said they never could have predicted the poor economy for the past three years.

From 2000 to 2006, county revenues grew an average 4.8 percent a year, according to the state audit. Expenses increased an average 4.7 percent a year in the same time.

Butler County’s population grew 14.2 percent to 332,807 people in 2000, then grew another 10.6 percent to 368,130 people in 2010, according to U.S. Census Bureau data. It is one of the state’s top 10 fastest growing counties.

Then the economy hit.

The audit report says the county was slow to reduce costs in 2008 as economic conditions started to deteriorate. General fund revenues decreased 22 percent from 2007 to 2009 to $82.7 million in 2009, according to the state audit.

But while the county’s revenues from sales taxes, property taxes and other sources have been hurt by the poor economy in recent years, the amount the county pays every year for debts has been relatively the same. Bond payments are fixed. This year the debt obligation consumes about 12 percent of the general fund budget of $79.3 million, expenses that cannot be cut as the county strives to reduce budget deficits.

“It becomes a very small pie to cut from,” said Pete Landrum, Butler County budget and management director. “You’re locked in besides the notes.”

Landrum said of the $9.5 million debt payment this year, $6.8 million is paying down principal.

Commissioner Chuck Furmon said as time goes on, the debt service will take care of itself, especially as the economy picks up.

“The infrastructure that we put in will serve us for years to come far beyond what the debt service is. It’s kind of the cost of doing business,” Furmon said.

Butler County Auditor Roger Reynolds is critical of the debt.

“The county’s been running debt service too high,” Reynolds said. “Like our neighboring county to the east, Warren County, they’ve done quite well with revenues in the economic downturn because they’ve have a lower debt level. Butler County has to be more selective in the purchasing and making sure they have cash to make the purchase than go out and incur debt, no different than everyday citizens do.”

However, Furmon said it’s important for taxpayers to know that the county has one of the lowest sales tax rates in the state of 6.25 percent and currently has its highest ever bond rating of AA1.

Warren County, also one of the state’s top 10 fastest growing counties, has no debt from its general fund, said Office of Budget & Management Director Tiffany Zindel. The county paid off in 2011 a combined bond issue for $111,983, Zindel said.

Warren County government employees moved into a new county building paid for in cash in 2001, she said.

Butler County’s bond to pay for its Government Services Center expires in 2019, Landrum said.

“We saved up over the years and actually paid cash,” Zindel said. “We had been planning the construction for this for over 10 years.”

A zero debt payment has been crucial, she said.

“When you have debt, you pay debt first and operating costs second,” she said. “It’s fine when your revenues are growing. The cycle we’ve been in since 2007, we’re declining.”

Landrum said the extra .25 percent in sales taxes assessed in Warren County generates about $10 million a year, which would cover the cost Butler County pays for debt.

Furmon doesn’t want to consider a sales tax increase.

“I think we can operate quite efficiently as it is,” he said. “We don’t have a desire to grow government.”

Hamilton County’s general fund debt payment in 2012 is $10.5 million, which is 5 percent of its total general fund budget, according to its Office of Budget & Management. The debts are to help pay for building acquisitions, building improvements and renovations, emergency communications equipment, and more, according to the Hamilton County office.

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