The County Council has denied County Executive Eileen M. Rehrmann's request to transfer nearly $1 million from delayed or deferred capital improvement projects into the operating budget.
Rehrmamn sought the transfer to help build a fund balance before the end of the fiscal year on June 30 in order to preserve the county's strong bond rating.
Council members denied the request Tuesday on the advice of newlyappointed Council Attorney H. Edward Andrews III of Bel Air. He saidsuch a transfer of money would violate the county's charter.
Larry Klimovitz, director of administration, said the legal challenge "was sprung on us" and argued Andrews' opinion was incorrect.
"I havea written opinion coming from an assistant county attorney that I did not have last night," he said. "We feel the off-the-cuff legal opinion of Council President Jeffrey Wilson and council attorney Andrews is wrong."
Instead of voting against the bill, council members, acting on Andrews' advice, amended it to say the money would be retained "in the capital fund for future capital projects." The amended billpassed on a 6-1 vote. Council Member Philip J. Barker, D-District F,cast the dissenting vote.
Rehrmann had asked the council to shiftthe $917,960 -- including $500,000 earmarked for building a new animal shelter -- into the operating budget to help build an end-of-year fund balance, preserving the county's AA bond rating.
Rehrmann andcounty Treasurer James M. Jewell say that 5 percent of the county's $149.2 million budget -- about $7 million -- must remain on the booksJune 30 to preserve the county's strong bond rating.
The county is planning to go to the bond market soon to borrow $3.9 million for its share of building two new schools.
At a public hearing before the council's meeting, Klimovitz told council members, "All legal arguments aside, one piece of legislation transferred the money into the capital projects fund. Another can undo that. We want that money to revert to the fund balance, which is used for pay-as-you-go projects, to help us build an end-of-the-year fund balance."
But Andrews told council members that legal considerations should be uppermost in their minds.
"My advice to the council is that you cannot do it withthe bill that's before the council tonight," said Andrews, citing two sections of the county charter that govern how the council should handle money.
Visibly frustrated by what he called a "last-minute legal argument," Klimovitz said that without the nearly $1 million, the county's end-of-the-year fund balance would be about $6 million.
"They killed it for the wrong reason," said Klimovitz. "If they disagreed with where to put the money that's one thing; but they killed it for the wrong reason. I can't say how that's going to affect us when we go to the bond market."
Anilkumar J. Hoffberg, a lawyer with Frank, Bernstein, Conaway & Goldman, a Baltimore law firm nominated by Rehrmann as bond counsel, said a 5 percent fund balance is an important part of a bond rating agency's assessment of the county's financial situation.
"A 5 percent fund balance is the target range, because it shows you have the ability to absorb drop-offs in revenues," said Hoffberg. "If you can do that, you're perceived as being strong. The fund balance is to be used if revenues drop off, and that's whatworries a rating agency."
Other tests include the ratio of debt service, per capita debt and whether the county has fallen behind in providing infrastructure services such as water and sewer service, he said.
S. Nelson Weeks, also of Frank, Bernstein, Conaway & Goldman, said a bond rating agency would not be happy to see a county cut services.
"But when they see a county trying to be creative, that's got to be a big plus," Weeks said.
"This year, the bond rating agencies are going to give everyone a tough review. We have a good record, and at least we're in the black, but that may not be good enough if we don't meet one of their tests."