The Mecklenburg County Board of Commissioners is taking a hard look at its spending habits and considering creating a fund to pay down its debt.
On Friday, commissioners discussed the county’s debt service, comparing Mecklenburg with other North Carolina cities, and examined how the county can maintain its AAA rating with Standard & Poor’s, Fitch, and Moody’s Investors Service.
County Finance Director Dena Diorio said the fund, which would provide dedicated funding for debt service, would allow debt service and capital expenditures to be more budget-neutral and intentional. The proposed revenue sources for the fund include $30 million in sales tax revenues and $11 million in lottery revenues. Both of those sources are considered “variable” sources of revenue, as is the investment income which will only net the county $500,000 a year.
Diorio said the county’s debt service — the cost to repay debt, including interest and principal — is $271 million. That comes out to $3,111 for every Mecklenburg County resident. That figure will decrease to $2,812 per person during fiscal 2011.
When comparing per-capita debt from the 2010 budget with other counties across the state, Mecklenburg leads the pack. In Durham County, the debt per capita is $2,387. In Forsyth County, it is $2,795. Guilford County’s is $2,332, and Wake County’s is $2,874.
Mecklenburg County’s debt is 3 percent of the assessed value of the county’s property, also the highest among comparable counties, the closest of which was Forsyth at 2.8 percent. In fiscal 2011, Mecklenburg’s debt is expected to drop to 2.7 percent of the assessed value.
Paying on the debt accounted for 18 percent of the county’s budget in 2010. That jumps to 21.3 percent in the 2011 budget, but part of the increase stems from a variable rate that requires the finance department to budget for more than is needed, Diorio said. It will likely be 20.4 percent, she said.
In 2010, Forsyth County paid 13.5 percent of its budget to debt service, while Guilford allotted 13 percent. Wake County had 10 percent of its budget and Durham County had 9 percent of its budget go toward debt service.
Mecklenburg County did surpass other comparable counties in its 10-year payout ratio, managing to pay off 72.1 percent of its debt within that time. Wake County came in second among the counties, paying off 71.4 percent of its debt in 10 years. Forsyth paid of 56.1 percent within 10 years, the least paid off by a comparable county.
A reimbursement from Central Piedmont Community College will bring in a “stable” $1.3 million a year, and revenues from Alcohol Beverage Control outlet sales will earn the county $600,000 a year, also a “stable” source of income. Fitch wants to perform a review on the county’s 2009 variable rate issue, which could result in a ratings action.
County leaders will meet with Fitch, Moody’s and S&P during a March 2-3 trip to New York.