‘A Lot of Heat, Not Much Light’ (Videos)

Bowie County TexasIn Commissioners Court on Monday August 25, members of the Financial Advisory Committee spent quite a bit of time and energy warning of an imminent budget and payroll crisis. Four days later, the Court learned there was never a problem.

The FAC’s presentation began with committee member Joe Dike suggesting that Judge Sterling Lacy use the committee as a resource, to help figure out the new budget. He said that it looks as if the county will end the fiscal year on September 30 with a budget deficit of around one million dollars, and suggested that Lacy’s budget didn’t account for that – Lacy should have budgeted a million dollars less in expenses next year.

Dike also suggested twice that Lacy raise the Maintenance and Operations budget, which of course would mean a corresponding increase in property taxes.

Many in attendance wondered why Dike was ignoring the tax anticipation loan, which was calculated (with the FAC’s help) to be more than sufficient to cover this year’s budget deficit.

Committee chairman Mike Sandefur then spent several minutes talking about how the county had less than $90,000 going into September, and listed several items in accounts payable, each of which would bring the balance close to zero, or far into the negative – and that without considering September’s payroll.

Sandefur also seemed (to the non-accountants in the room) to be ignoring the balance from the tax anticipation loan. Several minutes into his presentation, after bringing up accounts payable and suggesting the county’s possible insolvency as of September 1, he asked Judge Lacy, “Do you have a plan for that?”

He then asked the Court, “Do county employees come back to work after Labor Day? How can you expect them to work if you don’t all agree to pay them?”

He then told Judge Lacy that he (Lacy) would have to be comfortable with moving forward, to pay the bills. Then, he stated, “You cannot miss the meeting. You cannot abstain and let others carry this burden.” That exhortation seemed rather bizarre, considering it was three commissioners (Stone, Whitten, and Blackburn) who recently boycotted two emergency meetings called by Judge Lacy regarding courthouse security. Ironically, later in the same session,  two commissioners abstained from a vote. 

The gist of the first several minutes of Sandefur’s speech seemed to be that unless Lacy agreed to vote with the other commissioners,  the county’s bills would not get paid, and neither would the employees.

Sandefur reiterated Dike’s statement that this year’s deficit would impact next next year’s budget.

Finally – on the next agenda item – Commissioner Mike Carter asked County Auditor William about the remaining $1.93 million of the tax anticipation loan, as well as an anticipated $500,000 income from sales tax, and the $720,000 in the “FEMA” account. Tye agreed that all that money was there, or would be soon, but asked that Sandefur explain the situation.

Sandefur started to explain that it’s not a cash problem, when Carter stated, “It is a cash problem.” Sandefur responded, “No sir, you spent three hours with the auditor, and don’t understand what’s going on. That’s a tragedy.”

Sandefur continued, “There is not a cash problem, there is a legal spending problem,” meaning concerns about whether the county could legally spend any money after the fund balance was depleted. Apparently, it’s problematical to spend funds that weren’t received as revenue on budgeted items.

Carter accused Sandefur of “trying to scare the county employees, that they’re not going to get paid.” Dike responded, “No, he’s just stating facts.”

Commissioner Blackburn said, “I think it’s a legitimate worry.”

Sandefur then spent several minutes explaining various reasons why the loan couldn’t be spent once the budgeted revenue was exhausted, and again insisted that the Court vote unanimously.

After a recess for lunch, Carter suggested that since the first $3 million of the loan was spent by transferring it while the fund balance was still positive, that an easy solution would be to transfer the remainder of the loan that day – while the fund balance was still positive. He made a motion to that effect, but since it was Commissioner Whitten’s agenda item, he asked that the county get legal advice as to whether they could spend non-revenue funds. He asked Tye if that was correct, who said, ““If we move any right now, it will not increase our revenue…. The loan is not revenue.”

Sandefur said that he had spoken with the Texas Association of Counties about the problem of spending past the fund balance, and that “in modern times, they’re not aware of another county in this situation.”

After more discussion, the Court agreed (3-0, with two commissioners abstaining) to meet in special session four days later, after getting counsel from Tom Pollan, the county’s bond advisor who helped procure the tax anticipation loan.

The meeting on Friday was anti-climatic. Judge Lacy and William Tye had received a memorandum the day before from Tom Pollan, who said:

I believe there has been a miscommunication regarding the Tax Note that the County recently issued for it’s budget shortfall…. These funds are treated as additional revenue to make up the budget shortfall, not a cash shortfall.

Todd Pruit, who led the team from Patillo, Brown & Hill in performing the county’s last audit, was at Court on Friday. He stated that showing the loan as revenue would not be complicated. He told me after Court was adjourned that he wished their clients would call them in advance of a problem, so that they could help them avoid costly mistakes.

Sandefur, in a follow-up email the previous day, said Pollan’s memorandum, “looks like wonderful news for the September issues that our Financial Advisory Committee was concerned about.” He noted that the county would probably have $1.7 million left over from this fiscal year to start the next one on October 1 – a drastic difference from the negative $1 million that he and Dike had asserted on Monday. He then asked, “Will that be enough until tax receipts start coming in?” Neither Sandefur nor Dike attended Friday’s special session.

It would seem that, during all the research the FAC put into the problem of spending past the fund balance, they would have contacted Tom Pollan, who is not only the County’s bond advisor, but also wrote The Public Finance Handbook for Texas Counties, a resource from the Texas Association of Counties. Commissioners Court on Monday would have been much shorter, and no employees would have wondered if they would get paid in September.

I asked Judge Lacy about that, and he replied, “It was more than irresponsibility – it was fear-mongering. It served no purpose except to excite emotions, adding a lot of heat to the discussion, but not much light. I would have expected the Financial Advisory Committee to be more level-headed.”

https://youtu.be/23RkwsWXPH8

https://youtu.be/zE67JVle3KA
Note: Commissioner Tom Whitten was on a mission trip to Cuba.

Memo from Tom Pollan (PDF)

0 thoughts on “‘A Lot of Heat, Not Much Light’ (Videos)

  1. The two “CPA’s” on the Financial Advisory Committee have exposed themselves as the political hacks they are for electing James Carlow for county judge again. Considering all of the money and power James Carlow has, poor Sterling Lacy doesn’t seem to stand a chance in the upcoming race for County Judge.

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