Claim about DeKalb finances hits mark

When the Great Recession battered property values, counties across metro Atlanta responded to plunging revenues by raising tax rates.

Cobb raised rates 16 percent, DeKalb by 26 percent and Gwinnett by 21 percent in recent years.

DeKalb County also dipped into its reserves to balance its budget and paid another price: it ended fiscal year 2011 without a cent in that rainy day fund.

So it made news when interim DeKalb CEO Lee May announced last week that property values had rebounded enough that, the county’s reserve funds, taken together, now cover one month’s operating expense, as recommended by the state as well as county policy.

"Our reserves are now in much better shape than they were just a few years ago," May said.

PolitiFact Georgia was intrigued. Did DeKalb’s fund balance – the budget jargon for the reserves – really swell from nothing to a projected $57.5 million in four years?

The history

Such a financial turnaround would be a much needed boost to the county, where suspended CEO Burrell Ellis is about to be retried on charges he extorting campaign cash from companies that do work for the county.

In the two years since the initial indictment, a county commissioner has begun serving a 14-month sentence for defrauding taxpayers of more than $100,000, a former member of the county’s Zoning Board of Appeals pleaded guilty in February to taking a bribe for his vote and the former county school superintendent pleaded guilty to misdemeanor obstruction in a racketeering case.

In the midst of that, the county also has struggled financially.

The net value of all taxable property in DeKalb County tumbled from $24 billion in 2010 to $21 billion in 2011, according to the county’s consolidation sheets.

When the county revealed it had spent all of its rainy day fund to make ends meet in 2011, national bond rating agencies took note.

The agencies downgraded DeKalb’s credit score, meaning taxpayers paid higher interest rates on borrowing for major projects.

As recently as November 2013, Fitch Ratings said it still had concerns about the depleted reserves even as the county slowly tried to rebuild them.

County audits show the slow growth, including adjustments made in 2014 when the county switched its reserve accounting from cash on hand to modified accrual, so that all bills were paid with funds from the year they were charged:

Year End

Reserves

Goal

Percentage

2010

-$4.5 million

$45 million

-.10%

2011

$30 million

$44 milion

68%

2012

$41.5 million

$45 million

92%

2013

$42 million

$45 million

93%

2014

$49 million

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$48 million

102%

2015

$57.5 million

$48 million

120%

Source: County audits, 2015 midyear budget recommendations

A main challenge was that property values stayed low. Last year that net taxable value – called the digest – remained effectively the same as 2011, at $20.2 billion, according to data from the county property appraiser.

The change for 2015: The total gross value is projected to be $24.7 billion by year’s end, with a net value of $22 billion.

That increase is projected to bring in another $36 million in revenue this year.

May’s midyear budget adjustment calls for the county to spend $12.7 million of that money on items such as body cameras for police officers.

But May wants the rest, nearly $23 million, to be put into reserves.

"We had dipped into our reserves to make ends meet, which cost us our credit rating. We have spent every year since trying to restore that," said county spokesman Burke Brennan. "It’s our greatest single allocation from the increase from the economic recovery, but we will accomplish our goal."

There are two caveats to that claim.

One is detailed. May’s proposed budget adjustment shows that two of the five active tax funds – the fund set aside for fire service and unincorporated reserve that takes money from Recorders Court and business licenses  – will fall below that one month goal.

Only when the police reserve, designated reserve for roads and parks and the general fund reserve are added in does the overall reserve reach the 1.2 month of expenditures.

Rating agencies will look at the both the individual funds and the combined total reserve in their reviews. Michael Rinaldi, a senior director for Fitch who is the primary analyst for DeKalb, said that agency would consider police and fire reserves to be for essential services but would also look holistically.

"They have been moving in the right direction," Rinaldi said. "We certainly look at the trend, and if there would be a strain for the general fund to cover any deficits. In this case, that is generally not an issue."

The second asterisk relates to the process itself. May’s claim is based on his proposed budget adjustments. But the Board of County Commissioners has final say on those adjustments and may make changes before a vote in July.

Our ruling

May claimed that his mid-year budget would leave the county’s reserve funds in better shape than they have been in years.

Considering in 2011, there was no money in that rainy day fund, improvement wouldn’t be difficult.

But budget and audit figures show May’s proposal would restore the overall reserves to a goal of one month’s expenditures.

We rate his claim True.