‘Harsh’ analysis report from financial firm

David Barkemeyer
Milam County Judge

Now that budget planning for 2012 has been completed, at least for now, some of you have jokingly asked, “Now what are you going to do with all of this spare time on your hands?”

Well, what I’ve learned in these first few months in office is that trying to stay ahead of the next storm wave in this job is no joking matter.

Case in point. Alan Westerman, our financial advisor, who was here at the last commissioners court meeting to talk to us about refinancing our $ 6.5 million plus in bonds at a lower interest rate—which by the way will save us over $20,000/year in interest and some $275,000 over the remaining life of the series—sent me an e-mail from Fitch Ratings which made the following rather sobering obser vations about Milam County.

They stated that the downgraded qualit y of our bonds ref lects the county’s strained finances, weak management, and depressed rural area economy still reeling from the shutdown of the operations of its leading employer (Alcoa).

General fund cash reserves dropped markedly in fiscal 2010, erasing most of the gains of the prior 2 years. The county’s leading taxpayer (Luminant) represents 44% of the tax base.

Thus, the county’s financial operations are limited with marginal reserves and dependence upon one taxpayer for a significant portion of its revenues.

Year-end fiscal 2010 general fund cash balance totaled about $300,000 or 3% of expenses.

At the mid-year mark of fiscal 2011, officials (that’s me) were projecting a year-end $500,000 cash shortfall.

In response, the county implemented across the board spending reductions, when coupled with better than budgeted sales tax collections, are now expected to produce a small fiscal 2011 cash surplus.

Fitch believes past count y actions such as the historical failure to maintain sufficient levels of reserves, unrealistic budgeting, the conversion to cash basis accounting reflect weak management practices.

They state that how the county’s new management responds to the county’s economic and fiscal challenges will be a critical factor in the future for our credit ratings, and, as far as I’m concerned, as to whether I’m worthy to be your county judge.

These Fitch folks read us like a book. Here’s my reaction to this rather harsh analysis.

Our economic well-being really has nothing to do with the past. But it does have everything to do with the future.

We’re thankful for Luminant, but we can’t depend on them for our future just like we couldn’t depend on Alcoa forever.

Therefore economic development is job one. We must be working to bring new jobs and new companies to Milam County in 2012 and over the next 5 to 10 years, this is our primary challenge.

Let me clarify a couple of other points, we’re not going to end 2011 with a “small” cash surplus in the general fund, it will be at least a half million and as much as one million.

Secondly we will be working to reduce general fund expenditures and come in under budget again in 2012 by another half to one million to further build up reserves.

In addition we’re going to continue our efforts to build revenue flow from other sources to reduce our dependence on ad valorem taxes.

The challenges definitely lie ahead.

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2011-10-06 digital edition

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