December 22, 2009

Paula Hodges, audit manager for Martin Starnes & Associates, CPAs, P.A., told the Catawba County Board of Commissioners at its December 21 meeting that the County is in "sound financial condition" as a result of its conservative approach to budgeting and spending.

Hodges told the Board that the County received a “clean” audit opinion for this fiscal year and that their audit firm was pleased with the County’s internal control structure and financial accountability throughout the year.

“There were no questioned costs as a result of the audit of the County’s Federal and State programs," Hodges concluded. "The Catawba County Board of Commissioners, Rodney Miller and his staff should be commended for their excellent work."

Catawba County’s Finance Director, Rodney Miller, discussed several aspects of the County’s financial report. Overall, County spending went down as County departments collectively spent less than budgeted for fiscal year 2008-2009, due to tight internal controls and conservative spending, in addition to a reduction of 2% in operating costs across all departments in the spring of 2009, equaling approximately $1 million to make up for a loss in revenues.

Sales tax revenues declined significantly at year-end (down 10.7%) as the local effects of the economy translated into reduced retail sales in the county. Catawba County is a retail hub in the State, ranking 10th in retail sales compared to 17th in population in North Carolina.

Other revenues affected by the local economy included a 55% decrease in building permits, a 21% decline in Register of Deeds fees and a 20% decrease in investment income for the year.

Property tax revenues increased 3.1% as the County’s tax base increased from limited growth in real property and public utility values. However, that revenue increase was offset by property tax collection rates, which decreased by .47% for the year. Catawba County fared better than most other counties, which, on average, experienced a 1% decline in collection rates due to the struggling economy across the state. The County’s tax rate of 53.5 cents per $100 valuation for the 2008-2009 fiscal year was the seventh lowest among North Carolina counties with a population of 100,000 or more.

Overall revenues decreased by approximately $20 million. Funding for Mental Health Services largely contributed to this decline, as the service is no longer provided by county governments. Furthermore, the State of North Carolina assumed responsibility for Medicaid costs during the fiscal year, which reduced state and federal revenues previously used to pay those costs. However, the State took a half cent in local sales tax revenue to pay for the Medicaid swap.

On the expenditure side, when purely local funding is considered, funding for Catawba County’s three public school systems and Catawba Valley Community College received the highest percentage of county funding, at 59%. This increased percentage from last year is mainly due to the reduction in dollars spent for Mental Health services. Catawba County appropriated $39,948,749 for operating expenditures for the three school systems and CVCC, a 5.1% increase.

Public Health and Social Services expenditures represented 34% of total expenditures, including State and Federal funds. Expenditures for Public Health and Social Services decreased by 25.2% from fiscal year 2007-2008, due to a decrease in Mental Health Services provided by the County and the State’s assuming Medicaid costs from the Department of Social Services.

Catawba County has traditionally had a goal to keep two months’ worth of operating expenses in its reserve, in part because of cash flow issues since property tax bills are sent to taxpayers in July but revenues are slow to come in as most taxpayers wait until near the January deadline to make payments. The reserve is also kept in case of emergency circumstances, and to insure adequate funds are available to meet urgent economic development opportunities that may arise during the course of the year. The audit report showed that the county maintained this two months reserve for fiscal year 2008-09 in spite of the economic conditions the County faced.

Following Miller’s presentation to the Board, County Manager Tom Lundy gave a report on the steps taken by the County during Fiscal Year 2008-09 to meet the impact of the declining revenues. Cuts totaling $6.5 million have been made to date, with the potential for an additional $1.8 million in cuts in the current fiscal year (2009-2010), which will end on June 30, 2010. This would total $8.3 million in cuts.

39.1 Full Time Equivalents (FTEs) have been impacted by being eliminated, seeing a reduction in hours or by being frozen for a period of time. Training and travel was reduced, some capital projects were delayed or cancelled, and fund balance was used to help fund some projects. School projects tied to a reduction in State funding were eliminated, with the loss of Average Daily Membership (ADM) funds from the State.

A 2% across the board reduction by County departments in March 2009 resulted in $1 million in cuts. Schools and outside agencies were held harmless. Further budget reductions between July and November 2009, in response to actions by the State of North Carolina, cut approximately $5.5 million more.

Lundy also reported that County departments, schools and outside agencies have been told to plan for a further 2% across the board reduction for the remainder of the current fiscal year, approximately $1.8 million in further cuts, subject to revenue collections through February 2010.