I just read the 131 page financial audit of the Pickens County government for the fiscal year ending 6/30/22. Here are some highlights of the report and my comments.
The management of the county has the responsibility to prepare accurate financial statements in accordance with accounting principles generally accepted in the United States. All the external auditor does is to say whether those statements are free from material misstatement, whether due to fraud or errors.
You can read that is the letter of Cherry Bekaert (external auditor): “In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the government activities, the business-type activities, the Alliance… as of 6/30/22.”
The auditor doesn’t certify the money is being managed well or efficiently or the financial condition of the organization is excellent, good, fair or poor. All the auditor says is the statements are accurate or not. If a company is losing millions a year, but the financial statements are accurate, the audit would be favorable and the financial statements certified.
Stats: Swimming in Cash
From the Audit: The total revenue grew to $86.1 million from $77.0 million the year before. An 11.8% increase. The cash balance in all accounts was $88.7 million or an increase of $9.1 million.
Audit: On page 15 of the audit, these increases are explained. The county received its second payment from the Covid money of $12.3 million and the council approved a 9.9 property tax increase of $6 million in new revenue.
Alex: The County is swimming in cash. Why raise taxes? That is one reason why I voted “No” to the historic property tax hike in Sept 2021. It is also why I recommended last month the county roll back some of that tax hike (see the video).
Audit: The general fund (the fund the county makes is day to day expenses from) had a cash balance of $32.7 million that was unassigned and open for spending. That is 67% of the total annual budget.
Alex: That percentage is typically 15% to 20%. Again, the county is swimming in cash. I remember when I was on the school board the auditor was talking about the fat cash position of the school district, and the trustee from Easley at the time said, “That’s a good thing.” I yelled out, “Not if you are paying it!” Same comment here.
Audit: The library has a cash balance of $3.6 million or equal to 100% of its annual budget. That cash balance rose $332,000 this past year. Its cash balance has grown an average of 15% a year over the past 10 years. Alex: They library has its own millage rate, and its own saving account. It is swimming in cash too. EMS doesn’t have its own millage rate or its own saving account. Nor does the police, building codes, etc. The library is not a bank, and like the other departments it needs to come off its own millage rate and be like the rest of the departments.
Stats: Strong Revenue Growth Too
Audit: The total value of taxable property in the county is $11.0 billion. The assessed value is $626 million, so the value of a mill is $626 thousand.
Alex: What does that mean? All the taxable real and personal property in the county has a market value of $11.0 billion. Now when you multiple each property by their respective assessed ratios of 10.5% (manufacturing), 6% commercial and 4% residential, the assessed value is $626 million. Multiply that by the millage rate and you get tax revenue.
Alex: The amount of property in 2013 was $8.2 billion and its assessed value $451 million. Today it is $11.0 billion of market value and an assessed value of $626 million. That is impressive natural growth, hence impressive natural growth in tax revenue at CONSTANT tax rates. Again, and it is glaring when you read this audit, why is the council raising tax rates?
Audit: The value of a mill has risen steadily from $451 thousand in 2013 to $626 thousand today.
Alex: When the property tax rate goes from 0.063 to 0.064 or from 0.063 to 0.062 the county gains or loses $626 thousand in revenue. That $626 thousand is known as the value of a mill.
Audit: County debt is $25.9 million down the recent peak of $34.5 million.
Alex: Paying down debt is good. Bravo! Most of that is the jail bond at $21.4 of the $25.9 million of outstanding debt. They didn’t have to borrow all that money for the jail. They had plenty of cash on hand at the time. Paying interest for years now, for nothing. The second mistake they made on the jail bond was non-callable for 10 years. When interest rates fell, they were not able to refinance is for a much lower interest rate.
Stats: Miscellaneous
Audit: The past 10 years, EMS calls are up from 15,012 up to 18,722; Solid Waste tonnage from 36,482 up to 46,360; recycle tonnage from 4,842 up to 7,445; Park visitors: 6,619 up to 11,944; Library visitors from 544,840 down to 262,151; Marriage licenses from 781 flat to 801.
Alex: You can see why EMS and solid waste are my top priorities.
Audit: The county pension obligation is $57.7 million. Employees pay 9 to 9.75% of their pay into the pension and the county government 16.4% to 18.8% into the pension. Looking at the state pension fund, 55% is invested in equities.
Alex: These two pensions are ticking time bombs, so heavily invested in stocks. If these pensions don’t blow up, in time these pensions will bankrupt many governments. The cash flows are not there. They are so unaffordable now, less than 5% of companies offer them today.
To make it all work, these pensions need an 8% annual return on the portfolio. That made sense in the 1980’s and 1990’s when GDP growth was twice as strong. It made sense when the Federal Reserve was printing oodles of money in the 2000’s and 2010’s. There is little GDP growth and the Fed is being forced to stop the printing press. I think the jig is up for the stock market, hence these house-of-cards pensions.
Audit: The county population grew from 119,224 in 2010 to 131,404 in 2020 or by 10.2%. The state population grew by an average of 14.2%.
Alex: Slower than the state average, mainly because the growth in only in the lower part of our county.
Audit: The city of Pickens’ tax rate was 47.6 mills in 2010. 83.3 mills today.
Alex: The tax increases in the city of Pickens are out of control.
