Decisions on budget get tougher

Robey, council debate borrowing for construction

Interest costs at issue

$18 million shortfall projected this year

spending cut OK'd

February 15, 2002|By Larry Carson | Larry Carson,SUN STAFF

If baseball is a game of inches, government is a game of dollars, and the current economic downturn has Howard County officials carefully weighing the value of a million or three.

The county's tax revenue slump is so severe that County Executive James N. Robey is facing a projected $18 million shortfall in the current fiscal year. He also has run out of surplus cash, which has helped pay for expensive bricks-and-mortar projects.

Now Robey and members of the County Council are facing a classic election year dilemma - whether to borrow now for construction projects despite higher interest costs later, or be strictly frugal and just say no.

Both impulses were on display yesterday as council members agreed to slice $17,000 from their proposed $1.5 million budget for next fiscal year, discussed the borrowing issue with Raymond S. Wacks, the county budget director, and then voted to approve a $138 million county bond sale/refinancing package that will save the county $7 million in coming years, according to Dale B. Neubert, the finance director.

So far, there are $130 million worth of capital spending requests for next fiscal year that would require at least $62 million in borrowing - $19 million more than this year.

The question Wacks presented to the council is pivotal: Should the county sell bonds to borrow that extra money in each of the next 10 years for new schools and other projects - even if it will cost $3 million a year more in interest by 2005?

"I've noticed all the budget fights tend to be between $3 [million] and $6 million," Wacks told the council members during a discussion of borrowing and budgets. He presented members with charts showing the financial differences between borrowing $40 million, $50 million or $60 million each year for the next decade.

The county's Spending Affordability Committee is struggling with the same issue and has not reached a conclusion on what to recommend.

Because of the county's increasing wealth from rising property values and higher personal income, Wacks said, debt likely will drop as a proportion of either overall county revenues or assessable tax base in any of the three scenarios. The critical difference will be in annual interest owed - $52 million in operating budget cash this year.

"This is where we start to see some benefit for being the seventh-wealthiest county," Wacks said, referring to a recent study showing Howard with the seventh-highest household income in the United States.

But, as Councilman Guy J. Guzzone, a North Laurel-Savage Democrat, pointed out, the rub is that seemingly small increase in annual interest payments.

"Is $60 [million] or $80 million worth $3 million more a year? That to me is the bottom line," Guzzone said. West Columbia Democrat Mary C. Lorsung noted that as Howard County continues to grow and add schools, the senior population is also increasing, portending a possible crunch in the future. "I don't think anybody is saying that we're going to stop building schools," she said.

Indeed, Wacks said that although capital budget forecasts for distant years always predict a big reduction in expenses, more new schools and other items - such as all-day kindergarten - tend to pop up as the once distant time gets closer.

After the meeting, Republican Councilmen Christopher J. Merdon of Ellicott City and the western county's Allan H. Kittleman said they, too, are leery of borrowing much more next year.

"If we jack it up, that creates more stress in future governments," Merdon said, adding that he would be more comfortable sticking to a $40 million level of annual borrowing.

Kittleman, too, said it would be better "if we can live with this now." He applied that philosophy to the council's proposed budget, sponsoring $14,000 of the cuts to that budget. The other $3,000 in reductions were suggested by Lorsung.

"Let's try to cut some things now," rather than argue about them later, when the entire $800 million county budget is under scrutiny, Kittleman said.

The bond sale/refinancing was celebrated by all because of the low (4.2 and 4.6 percent) interest rates the county's Triple A bond rating brought. Neubert said that favorable interest rates tripled the county's long-term savings on one series of bonds in just the past several weeks. The bonds will take between 15 and 29 years to pay off.

"This proves how on top the [Robey] administration is of the financial situation," Guzzone said after the vote. Robey issued a statement after the vote saying the low interest rates "reflect a vote of confidence in Howard County."

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