Beaufort County wants to keep more cash in reserves

zmurdock@beaufortgazette.comJanuary 6, 2014 

Beaufort County officials want to keep more cash on hand to strengthen the county's credit rating and have more reserves available should a natural disaster strike.

An initial proposal would require the county to have five months of money -- the equivalent of nearly 42 percent of its annual budget -- in its reserve fund by 2020.

The county currently keeps about $24 million in its reserve, which would be enough, for example, to keep county services running for three months in the event of a hurricane disaster, county administrator Gary Kubic.

A larger reserve also would show the county to be financially healthy for the long term, leaders say.

Credit agencies consider the level of reserve funds when assigning their credit ratings, which in turn can affect interest rates when the county borrows money, as it does when it sells bonds. Ten years ago, Moody's issued the county a financial warning for having too small a reserve fund, under $4 million, deputy county administrator Bryan Hill said.

A larger reserve also could help the county attract more businesses by giving it more financial flexibility, Kubic said. If a major company said it wanted to open another facility in the Lowcountry, Kubic offered, the county could dip into its larger reserve fund to create a bigger, more lucrative incentive to attract that business.

With those points in mind, Kubic thinks building up the reserve should be a priority the county finds important enough to write into law.

Just how large the reserve should be is a question County Council will have to address in the coming weeks.

On Monday, the council's Finance Committee discussed the proposed policy but did not vote on it. Instead, the committee will meet with a representative from one of the county's financial adviser firms during the next finance committee meeting at 2 p.m. Jan 13.

The reserve's primary function is to fund the county in an emergency. In the event of a bad hurricane, it could take at least 90 days to be reimbursed for federal aid during cleanup, Hill said. That kind of delay is what inspired the proposal for a policy that requires five months of funding, he said.

"We're going to absorb an awful lot of cost upfront that, say, a school district wouldn't have to," councilman Jerry Stewart said. "I think (the proposal) makes a lot of sense, and we certainly do, I beleive, have to have a larger reserve to cover it."

Former Beaufort County school board member Jim Bequette disagrees, arguing that much of that cost will be shared among the towns and state.

Bequette, a longtime licensed accountant, detailed some of his arguments against a policy for such a large reserve Monday morning in an email to County Council members.

"They do need a policy; I don't mind a 20 percent reserve, 25 percent, that doesn't bother me," he said. "But 42 percent is ludicrous."

Councilman Rick Caporale agreed that five months' funding is too much. Instead of only being a reserve for emergencies, it could create an environment for frivolous spending. Stronger credit ratings and the money for opportunistic business investments are only fringe benefits, he added.

"Five months just seems like an awful lot to me," Caporale said. "We haven't seen the capital improvements plan yet."

That discussion was exactly what county officials hoped the proposal would generate, Kubic said. The goal was not to nail down a number, but to move the council and the county closer to establishing some kind of reserve fund amount to strive toward, he added.

"One simple goal is to create a law" for the reserve fund, Kubic said. "That gains a lot for us; it shows a committment."

The rule could still be amended in the future to reflect differences in the county's financial standing at that time, he said.

"You use this to calibrate your reserve fund over a long period of time," Kubic said. "All we use it as is a tool, a target, an objective."

Follow reporter Zach Murdock at twitter.com/IPBG_Zach.

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