Beaufort County Council wants more answers before approving a reserve-fund policy

zmurdock@beaufortgazette.comFebruary 3, 2014 

STOCK

Beaufort County Council members have lingering questions about how much cash the county needs to keep socked away.

That money -- the county's general reserve fund -- helps bolster the county's credit rating and can be used if a natural disaster, such as a hurricane, devastates the area.

The county has no rule about how much it should hold in reserve, and the council's Finance Committee decided Monday it needs more details before it can devise one.

Several council members were particularly concerned about how increasing the amount in the fund would affect the tax rate.

The county has about $24 million in its reserve fund, equivalent to almost 25 percent of its annual budget. County staff wants to hold back more to improve the county's financial standing.

An initial proposal from the staff would require the county to have five months of money -- or about 42 percent of its annual budget -- in its reserve fund by 2020. It would also establish a floor, requiring the county to keep at least enough money in the fund to operate for two months.

But a rule requiring the county to steadily increase the reserve could become a problem if the county had to cut services or raise taxes in order to set aside money aside, Councilmen Rick Caporale and Bill McBride cautioned.

Instead, the council might consider lowering the amount held in reserve to around 33 percent of the county's budget, splitting the difference between the 42 percent suggested by staff and the 25 percent currently in the fund, Caporale said.

That would still give the county more money to use in an emergency, but it would be less of a burden on the daily operations of the county, Caporale said.

Council members Brian Flewelling and Jerry Stewart agreed the lower percentage is more realistic and argued a tax increase should be a last resort to increasing money in the fund.

Ten years ago, credit-rating agencies issued the county a warning for having too small a reserve fund -- under $4 million, or about 5 percent of that year's budget, county administrator Gary Kubic said. Since then, the county has grown its reserve nearly every year by saving in small ways, including leaving positions vacant.

Today, the county's credit rating is stable and better than or equal to most of the counties in the state, which is due in part to the county's commitment to saving money, financial adviser Amy Vitner of FirstSouthwest has said.

But at less than 25 percent of the budget, the county's reserve is smaller than its neighbors' funds, FirthSouthwest data show. For example, Colleton and Charleston counties hold about 31 percent of their budgets in reserve.

Establishing a reserve policy would improve the budget process by giving county staff a specific rule that supports those savings, Kubic said.

The committee will discuss such a rule, along with questions about how it might affect the availability of cash, at least once more before making a recommendation to the full council, Caporale said.

However, it's clear county staff and the council want to establish the policy during this spring's budget process, Caporale said.

"I think the dialogue is healthy, and I see some good movement toward a consensus," Kubic said. "Having it as a management tool really will help the budget process."

Follow reporter Zach Murdock at twitter.com/IPBG_Zach.

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