2009 - 09-21-09 Regular Meeting - Laserfiche WebLink

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BOOK 13 P~Gr 51 LEE COUNTY Committed Today for o Better iornorrow MEMORANDUM TO Chairman Richard Hayes Vice Chairman Larry "Doc" Oldham Commissioner Robert Reives Commissioner Ed Paschal Commissioner Jamie Kelly Commissioner Linda Shook Commissioner Amy Dalrymple FROM: John Crumpton, County Manager RE Debt Capacity/Quarter Cent Sales Tax DATE August 12, 2009 There have been a lot of questions about our debt capacity and other financial matters related to the vote at the last Commissioner's meeting to hold the % cent sales tax referendum and begin construction and repairs at the Lee County High School Campus. Lisa Minter and I have been reviewing our budget, revenue forecasts and financial models since that meeting- With the passage of the State's new budget, I need to communicate to you the County's new debt capacity and the impact of recent decisions on that capacity. First, I would like to remind everyone that over the last two budget preparation cycles, the main focus of the budget was not to raise property taxes. Knowing that the most important issue was to keep the property tax rate at 75 cents, I made several adjustments to the amount of the property tax revenues that went to debt service/capacity. Under our financial policies, we use both the property taxes in a current year and the Capital Reserve Fund to fund our debt service. On an annual basis, we contribute 1 percent of the total budget to capital reserve- As needed, so that we don't have to raise taxes, we transfer funds from the capital reserve to help fund debt service In fiscal year 2006-07, the County contributed 9.5 cents of the .75 cents tax rate to debt service Over the next two budgets, this amount dropped to 7.9 cents- The 9.5 cents actually exceeded the required debt service payments The amount over the debt service went to the capital reserve fund The effect is that we are contributing less to the capital reserve fund and therefore we have fewer funds to start new debt service on new projects- This 1.6 cent reduction lowered our contribution to debt service and capital reserve by $670,000 per year. While this reduction dropped our debt capacity by an estimated $8 million, it saved 12 to 15 jobs during the recent budget process. It is important to remember these decisions had been made after the % cent sales tax referendum was defeated in 2007 and the fact that it was decided not to renovate Lee County High School at that time