Executive Quickly Tightens Spending Says Cost Cuts Needed To Ensure Bond Rating

December 09, 1990|By Carol L. Bowers | Carol L. Bowers,Staff writer

Within 24 hours of taking office Monday, County Executive Eileen M.

Rehrmann called for spending cuts and began scrapping some capital improvement projects to avoid an end-of-the-year deficit.

The moves mark the first steps of a plan by the new county executive to protect the county's coveted AA bond rating, which is at risk because the county now projects no budget surplus at the fiscal year end, June 30, 1991. It would be the first time since 1983 that Harford would not show a budget surplus at the end of the fiscal year.

This past June, the county auditor had projected an $18 million surplus.

In an effort to build a surplus, Rehrmann imposed a 30-day freeze on hiring and procurements, leaving 53 permanent jobs and 81 temporary and seasonal jobs unfilled.

Rehrmann also said she would delay or eliminate some capital improvement projects, including a new county administration building in Bel Air.

She said tomorrow she planned to meet with her staff to begin a review of capital improvement projects to see which ones could be killed or delayed to save money.

"The first (capital) project that will be iced is the new county administration building," said Rehrmann, noting it will save the county $130,000. That building was to be built by an outside contractor at its own expense and then leased to the county.

Such projects -- approved by the former county executive and County Council -- and declining tax revenue had whittled away at the projected $18 million surplus, Rehrmann said, necessitating the cost-cutting moves.

"Seeing that we always had these nice surpluses, certainly it was a surprise to find the surplus had been taken for pay-as-you-go projects and there was zero or less than zero left," Rehrmann said.

County Treasurer James M. Jewell said recent projections show income tax revenue for the county could be $1 million less than anticipated.

Recordation taxes, charged for filing property titles and other legal papers with the clerk of the court, also could be off by $1 million, he said.

Rehrmann said that means the county is "facing a break-even situation or a deficit at the end of the fiscal year. Neither situation is tolerable."

Each could jeopardize the AA bond rating the county has earned from Moody's and Standard & Poor's, two nationally recognized bond rating houses, she said.

The higher the bond rating, the lower the interest the county must pay back on bond issues. The highest bond rating is AAA; AA is the second highest.

A drop in the bond rating could cost the county between $500,000 and $1 million in interest on a $10 million bond issue to be paid back over 20 years.

Said Jewell, "That's why it is extremely important we maintain the AA rating. I'm not looking at the possibility of it dropping. We will maintain (the AA rating) or do better."

To maintain its rating, the county must have a minimum of 3 percent of the county's budget -- or $4.5 million -- left in the county coffers at the end of the fiscal year, said Jewell. The AA rating is even better protected if the county can show a 5 percent surplus -- $5.9 million.

That means between now and June 30, 1991, when the fiscal year ends, the county must save at least $4.5 million, said Rehrmann.

She would not predict which capital projects other than the administration building may be affected, but she hinted an addition to the county Detention Center in Bel Air was at risk.

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