Why Does King William Need a $11 Million Cash Reserve?

King William County cash reserves — how much is too much?

by Bob Shannon

We often listen to Pols cite the “gouging” we poor rubes are being subjected to. Members of Congress & our state legislative bodies –even local Pols get in on the game — tell us that big banks, big insurance companies, big brokerage firms, big pharmaceutical companies, big this or that are gouging us … and, by golly, the Pols are going to do something about it. Absent our Pols’ intervention, we would be bowled over by institutions cheating us at every turn.  

What they don’t talk about is the gouging they do themselves. No better example of this is what we have happening right here in King William County. A theft of epic proportions is taking place right in front of us.

Local governments need a reserve fund for a  time when the economy contracts and the local government needs funds to continue operating. This fund is supposed to be for the purpose of paying the ongoing routine costs of local government. 

In 2012 the King William Reserve Fund stood at a reasonable $3.2 million. The recommendation of the Government Financial Officers Association states that a locality’s reserve fund range should be between 5% and 15% of its annual expenditures. That would put the appropriate number for King William somewhere between $1.5 million and $4.5 million.

Today that Reserve Fund sits at $10.9 million! That number is published in four county government documents, in spite of their current efforts to manipulate that number. Why? Because county officials know the citizens of King William are aware of this “gouging,” and are beginning to ask questions, lots of questions.

The first question: Why is the reserve so high, and why hasn’t the Board of Supervisors lowered the outrageous real estate tax rate to a level commensurate with surrounding localities? The Virginia Association of Counties says that the average county real property tax rate in Virginia is $0.67 per $100. King William sits at $0.88, a stunning 32% higher than the Virginia county average.

What are county officials planning to do with this money? They are getting ready to spend a truck load of it on private commercial developments under the guise of “targeted economic development.” Virginia Tax payers coughed up $10 million for a natural gas pipeline built in 2010 that was going to “open up development down Route 360, benefiting all of us.“ Nine years later, and just where is all of that benefit we were promised?

The King William supervisors have been gouging homeowners, and they are getting ready to hand the money over to their crony developer pals. Yes, it is that simple, folks.

Bob Shannon is chairman of the King William Tea Party.   

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9 responses to “Why Does King William Need a $11 Million Cash Reserve?

  1. Does King William anticipate some future infrastructure costs?

    Some counties essentially use their reserve fund as a CIP or a hedge on future CIP costs…

    If they lower it – will they still owe debt that ought to be repayed?

    If they just moved that money to a CIP… would that be not good?

    each county’s situation is more than just the amount of money in reserves. Just like a home budget… maybe a car needs to be replaced in a year or so.. Maybe the HVAC is on it’s last legs.

    Counties have the same issues.

  2. Do something useful with that money. Use the money to build a practice facility where the Redskins can spend summer camp and then out-bid the City of Richmond for the privilege of further enriching Dan Snyder.

    A lot of economic development projects are pretty half baked.

  3. just to point out – if you have an old school that will need to be replaced or remodeled… 11 million is chump change.

    I’d have to see what else the county has that might need to be funded soon.

    More than a few counties in Virginia do not do a legitimate CIP plan where they are looking in the out years for infrastructure costs. New schools, landfills, public safety, court buildings, and some counties build up reserves if they anticipate having to increase contributions to unfunded liabilities for OPEB, etc…

  4. A rare instance in which I agree (provisionally) with Larry. Does King William’s cash reserve function as an infrastructure fund? (Shannon implies that it does.) Does K.W. have other funds set aside for infrastructure-related purposes? Have county officials provided a justification for setting aside so much money?

    I’d also like to know what basis Shannon has for suggesting that the excess funds will be used for “economic development.” I don’t doubt him, I’d just like to know the basis for the statement.

  5. The County Administrator’s recommended budget shows an increase in real estate tax to 90 cents a hundred, 50 for the school fund and 40 to the general fund with capital expenditures of $1.123 million.

    •King William County currently has $10 million in unassigned general fund balance

    •The General Fund Balance is not a “slush” fund but rather an opportunity for the County to reinvest back into the community without taking on additional long term debt

    •These funds are also an opportunity for the County to reposition itself financially
    Options are listed as:
    1. Utilize $3 million of General Fund Balance and additional funding from HHMS Bond Savings to reduce annual debt service up to $1.1 million

    2.Utilize $2 million of General Fund Balance to commit to the Capital Fund as part of a “good faith” approach to address future economic development, infrastructure, and business development within the County. The Economic Development Authority and the Board of Supervisors working together can develop a strategic approach for the use of these funds as business opportunities arise.

    The Government Finance Officers Association (GFOA) recommends as a reserve no lessthan 2 months of regular general fund operating revenues or regular general fund operating expenditures.
    •Two months of revenue/expenditure would equate to $4,333,333 or 16.67% of the overall budget

    With the current level of General Fund Balance the County has approximately 38.5% capacity or 4 ½ months of operational funding.

    Budget Recommendations

  6. I agree with both Larry and Jim. There are a lot of legitimate reasons that a local government could be building up a reserve. For example, my home county of Halifax is now in the midst of a court-ordered, $20+ million courthouse renovation project and is facing either an extensive renovation of the high school or replacing the building, at a price tag of $80-100 million.

    Leveling charges of cronyism with “developer pals” without offering any proof or other analysis is irresponsible.

  7. I have a recollection that there is some statutory requirement to issue bonded debt for capital projects that fit some definition. Does this ring any bells?

    • The power of localities to issue debt is pretty broad as to what sort of projects are eligible. Sec. 15.2-2604 authorizes localities to “Contract debts for any project, borrow money for any project, and issue its bonds to pay all or any part of the cost of acquiring, constructing, reconstructing, improving, extending, enlarging and equipping any project;”

      There could be limitations in individual city or town charters regarding the sort of projects for which debt could be incurred.

      There are other types of limitations in Article VII, Section 10 of the Virginia Constitution:
      1. Cities and towns may not issue general obligation bonds in an amount that causes their indebtedness to exceed 10 percent of the assessed value of taxable real property.
      2. Counties may issue general obligation bonds only if approved by referendum. The issuance of revenue bonds is not subject to the referendum requirement.

  8. Thanks Dick, especially explaining the distinction between revenue and GO bonds.

    Also, most counties, cities, towns with water/sewer – those facilities are paid for by those that are served – not all taxpayers and it’s a balancing act that takes careful and competent management between the capital costs and the operating costs – a microcosm of the larger county/city issues involving a lot more diverse infrastructure and operational costs.

    The problem with many of the “low-tax” advocates is they have a too simplistic view of the realities of government and especially so at the local
    level where Schools and Public Safety, fire, rescue and law enforcement – courts, social services, etc are substantial cost items that do take taxes to build, maintain and operate.

    Low tax activists – that do get elected to office – end up getting “schooled” on these issues.

    We had a near majority of the seats of the Board of supervisors in Spotsylvania taken over by low-tax , tea-party folks but over time – they
    are now seeing that it’s not so easy to keep them low. They needed a new
    school which was over 100 million. They needed a new public safety and courts building… and now they are worried about low pay because employees are leaving for higher paying counties.

    I’m a low tax guy myself. It’s outrageous how much they tax at the county level – a new car … not just on purchase – every year – a pile of money for that car and do they spend any of it on roads , nope. So the rural road that I use is coming apart and the county says they do not have the money to accelerate repaying… they wait for VDOT to get it on their list.

    We approve development willy nilly but now we cannot get proffers so we approve the development overload the roads where that development is done and say that we have no way to upgrade the roads until VDOT can get to it 10 years later…

    but I still pay hundreds of dollars for that car……. and not a penny goes to transportation …

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