LACONIA — The fund balance, or accumulated surplus, is at risk of becoming the orphan as the Belknap County Commission and Belknap County Convention prepare the 2015 budget.
The fund balance consists of excess revenues and operational savings accrued during the fiscal year. It serves two purposes. First, the fund balance is among the factors weighed by agencies that rate the county's credit. For example, in 2103, when Moody's Investor Service reaffirmed the county's Aa2 rating, it noted that "sizeable fund balance growth" could raise that rating while "draw down of reserves" could lower it. The rating affects the county's cost of borrowing.
Second, each year a portion of the fund balance is applied as a revenue to offset the amount to be raised by property taxes. This year $1,775,000 was drawn from the fund balance, reducing the amount to be raised by property taxes from $15-4-million, which would have represented an increase of 11-percent, to $13.7-million, a decrease of 1.6-percent.
Between 2003 and 2011 the fund balance ranged from a low of $4-million to a high of $7-million, enough to sustain the credit rating and stabilize the tax commitment. Since then, however, the fund balance has shrunk, from $5.2-million in 2011 to $3.9-million in 2012 and to $3.7-million in 2013. The fund balance is projected to fall below $3-million by the end of this year.
In 2012, the beginning balance of $5,261,501 was augmented by excess revenues and operational savings of $2,394,842, but $3,750,000 was used to reduce the amount raised by property taxes, leaving a balance of $3,906,343 at year end. In 2013, the fund balance was replenished with $2,148,812 in excess revenues and operational savings, but $2,350,000 was applied against property taxes, leaving a balance of $3,705,155 at year end .
This year, the fund balance is projected to grow by $1,050,000 to $4,755,155, of which $1,775,000 will be be used to reduce property taxes. The fund balance is projected to end the year with a balance of less than $3-million. In other words, in the fund balance is expected to have shrunk by more than 40-percent between 2012 and 2014. The decline reflects the use of fund balance — $7,875,000 in the last three years — to limit increases in the amount to be raised by property taxes.
With the fund balance projected to close the year with a balance of less than $3-million, there will be less capacity to continue offsetting rising property taxes to the same extent as in recent years. This week the county commission indicated that it may recommend a budget of of approximately $27-million in 2015, which would increase the amount to be raised by property taxes by ten-percent.
At the same time, the county is eyeing the prospect of renovating, expanding or rebuilding the county jail, a project that would financed by borrowing. The cost of the borrowing could hinge on the county's credit rating, which in turn could be affected by the fund balance.
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