Borrowing can save us millions

July 01, 2007|By John Schnebly

Something really good just happened in Washington County government. You probably didn't notice, since it happened with little notoriety and fanfare.

Last month the County Commissioners, by a vote of three to two, passed its 2008 budget. Included within this budget was approval for $14.9 million in tax-supported borrowing for capital projects in the upcoming fiscal year. This is a substantial increase in borrowing and it reflects an acknowledgement on the part of the three commissioners that voted "aye" that times have changed.

Why was this vote such a landmark event? Well, since the early 1990s, the community and the commissioners have suffered from an extended hangover associated with the collapse of the former Washington County Sanitary Commission. Longtime residents will recall how this organization ran out of money, was unable to meet its obligations on about $52 million in outstanding debt and ended up being absorbed by county government in order to salvage the situation.


This outcome produced a string of disastrous consequences for county residents. For one thing, county utility users saw swift increases in what had been artificially low water and sewer rates. In addition, these circumstances put a horrendous strain on county finances. Former County Commissioners President Greg Snook recounts with grim reflection on his first term in office when the county government had to set up a line of credit to meet weekly payroll.

And there was another even more debilitating effect of this crisis - an unhealthy phobia acquired by most elected officials regarding responsible borrowing.

No one wants to revisit this type of financial angst, but as I said, times have changed. The once daunting water and sewer debt is plummeting and being paid off at a rapid rate. The county's finances have rebounded strongly, due to the sound stewardship of consecutive boards. In particular, its cash reserves now meet the standards recommended by the county's auditors.

The external environment in our community has also changed greatly. We are now seeing population growth as a result of immigration to our community. As a result, we can no longer indefinitely delay needed road and school projects for years and years.

About the year 2000, the county administrative staff began to prod the elected County Commissioners to examine the issue of responsible borrowing. To that end, the county staff, with the help of its outside financial advisor, began preparing an annual debt affordability study. This study examines our borrowing rates compared to peer jurisdictions, and recommends a "safe" limit of borrowing linked to the county's sustainable, long term revenue projections.

Since the first debt affordability study, the county has consistently borrowed less than the acknowledged safe amount. This year, for the first time, the commissioners came very close to borrowing the recommended amount of $15 million. As a result, we should commend this board for responsible and progressive financial management.

With this type of thinking, perhaps we can avoid situations such as the one we saw recently on the Maugans Avenue rehabilitation project bid. After years of postponement, the cost of this project climbed and climbed. In the end, it came in at about $7.5 million, which was 50 percent higher than anticipated.

Construction delays can cost us dearly. At a recent meeting of the Washington County Economic Development Commission, Commissioners President John Barr indicated that the current annual rate of inflation for construction projects is about 10 percent. He went on to postulate that borrowing money at an annual rate of 4.5 percent seems pretty reasonable in light of this fact.

Evidently, his line of thinking carried the day with at least two other commissioners and, as I said at the beginning, this was a good thing for the taxpayers of Washington County.

John Schnebly is a Hagerstown resident and a former Washington County Commissioner.

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