Orange County Commissioners Consider Saving Less in Emergency Fund

Government coffers in Orange County may be getting lighter as the board of commissioners considers reducing the percentage of annual revenue kept in reserve for emergency expenses.

Speaking in his capacity as chief financial officer of the county, Gary Donaldson briefed board members last week on the recommended degree of reduction for the unassigned fund.

“During the presentation of the financial audit, due to the growth in expenditures, we moved from 18.5 percent to 16.2 percent — again, within the recommended practice by GFOA,” he explained.

The Government Finance Officers Association advises counties to set aside 16.7 percent of their operating expenditures for financial planning and hardship purposes.

Commissioner Mark Marcoplos claimed that allocating an even smaller percentage of expenditures to the unassigned fund would benefit the county by bolstering its spending capabilities.

“To have that money available now, given that hardly anything is going to cost less in the future, you’re actually making an investment of that one percent worth of money that is going to save money as you buy something now that you need,” he offered.

According to Ted Cole, a senior advisor with Davenport & Company, board members must weigh the need for financial liquidity against policies that advocate for fiscal prudence.

“Part of the discussion is: is this solving a short-term issue or is it just trying to free up dollars generally,” he asked.

The issues of school district funding and rising property tax values led Commissioner Barry Jacobs to consider the consequences of undue adjustments to the unassigned fund.

“I assume that the interest in lowering it to 16 [percent] is so we can give another percent to the schools, which is what the advocates did last year with the half percent, so that money will not be available to offset the property tax increase that’s coming the year after next,” he predicted.

Those considerations were reiterated by Commissioner Earl McKee, who reminded board members that allocations to the fund have decreased annually since 2013.

“There’s a saying on the farm that you can only sell the cows one time, and when you take this money — this one percent — out, you establish a new level, and that money’s not there anymore,” he noted.

Those decreases often affect credit scores, but Commissioner Mia Burroughs brought attention to the fact that Buncombe and Guilford counties maintain high ratings with low reserves.

“I do believe that 17 [percent] is a little more conservative than we need to be,” she affirmed. “I’m looking at the three counties with lower percentages and AAA ratings, so I believe we should lower it to 16.”

Board members will vote on decreasing the percentage of expenditures allocated to the unassigned fund tonight at 7:00 PM during a regular meeting.