FY2012 Budget and County Debt

The Fauquier County fiscal year runs from July 1st of one year to June 30th of the next with the label of the year applying to the year in which the fiscal year ends. So, in other words, FY2012 stands for "the Fiscal Year ending June 30th, 2012".

Now that we're all pros at understanding why budgets are called what they are, lets dive right into the big numbers.

The total budgeted amount of spending across all of the funds is $260,566,628 with the major portion, around $154.2 million, being allocated to the General Fund.  This general fund includes several categories, but the big one is the School Division Operating fund. Below is a chart showing the allocation of all finances within the General Fund. I've clumped together a couple of the smaller line items into an "other" category for now.

Do you see the "Capital Improvements Fund"?  It shows up as 0%, but its actually $200k.  What is the Capital Improvement Program fund (CIP)? Well, it is the county's way of keeping track of capital projects and funding for those projects.  Simply said, this fund is for building stuff.  There is one small twist though because the $200k allocated to this fund is actually a down payment on the planned debt for the year, which is $17.2M.  For those of you not as quick with numbers, $200k is equal to that $0.2M on the end of the $17M.   So I decided to play with the numbers and see what the chart would look like if you include the full $17.2M in the budget rather than the 1.16% down payment.  Essentially, this is what the fund allocations would look like if we paid in full for these building projects. Below is the result.

Ahh, much better.  So, you can see that if the CIP were fully funded this Fiscal Year (FY), it would account for about 10% of all funds allocated to the General Fund, without making cuts anywhere, simply increasing the funding.

Some financial/pie chart nerd out there has seen another number already--the "Debt Service Fund".  The Debt Service fund is used to pay the principal and interest on currently accumulated debt.  In the adopted budget this adds up to be 9% of all spending in the General Fund.  I decided to look around a bit and see if I could find a policy on how debt is handled in Fauquier County, and I found the the County Fiscal policies, Debt Issuance & Management section.  This section has a few key items, included below.

The County will consider the use of general obligation debt 

on facility construction projects or acquisitions requiring at least $25,000,000 in debt 

issuance.  Issues requiring the threshold amount of debt issuance shall be subject to 

voter referendum regardless of the financial mechanism.  

Simple enough.  Any debt needed over $25M and the voters get to choose.  What else is there?

Debt Capacity:  The County’s debt capacity will be defined as 10% of the aggregate 

total of budgeted revenue in the General Fund, Volunteer Fire and Rescue Fund and 

the Conservation Easement Service District Fund.

Wait a second, what?  The "debt capacity" is 10% of those 3 funds?  Well, it appears (does anyone know for certain?) that debt capacity refers to the amount of debt the county can handle in a given year.  So this definition would apply to the Debt Service fund, which weighs in at about $13.5M or 9% of the General Fund. 

But what about the amount of debt compared to the amount of money spent by the General fund in a single year?  Using the numbers discussed above with the charts, we see that just this year around 10% is being added to the debt.  Even if you take into account the few million allocated for the other funds, you'll only see those numbers drop by about 1% more.  A little more digging reveals the numbers that there is currently $115.5M in outstanding/unpaid debt.  If you take this FY's $17.0M addition to the debt plus the $115.5M unpaid debt and minus the debt service payment of $14.7M (assuming all goes to principal and none to interest--hey, this is a conservative estimate) you end up with a Debt to General Fund percentage of 76.4%.

Personally, I'd like to see this number a lot lower.  If I live to be 253 years old, like Fauquier County, I would hope that I would be able to save a few million here and there ahead of time and pay for projects in cash, rather than spend hard-earned tax-payer's money on interest payments. After all, if the $13.5M this year spent servicing the debt were saved up, the county would almost pay for their building improvements completely instead of paying interest on it for several years to come.

Ok, there's one last item I wanted to mention from the county's debt policy before you stab your eyes out.

Cash Financing: The Board of Supervisors will attempt to fund not less than 10% of the 

Capital Improvement Program’s construction costs from current financial resources

You'll recall from above that the debt projected to be added during FY2012 is only 1.16% funded this year. That is a lot less than 10% and I would venture to say a very poor "attempt" at funding towards a 10% down payment.   Well, if you look at the numbers a bit more, you'll notice that if you average the debt added and the down payments made over the 6 year plan held by the CIP that this down payment number averages to be over 18%.  That's not too bad, but I'm not sure I read that policy as, "not less than 10% averaged over 6 years".