By MIKE WEST/Courier Editor
Cannon County government is facing a financial crossroads says an October 7 letter from Justin Wilson, State Comptroller.
"The Commission needs to take immediate action to control the County's spending and overall financial situation. Without strong, decisive action by the Commission, the County will spend more money than it receives during fiscal year 2017," Wilson said.
Wilson's letter resulted in an "emergency" meeting of the full Commission where County Executive Mike Gannon and County Attorney Mike Corley stressed the importance of Wilson's letter.
"I'm going to have to be more plain spoken," Gannon told the Commissioners he has been in constant conversation with the Comptroller's office who urged an immediate meeting of the County Commission.
The meeting was informational only with no action on Wilson's letter.
"We're not broke," Gannon reminded the Commissioners. "Normally, I try to give bad news to you as gently as possible.
"We don't have a cash problem ... we have a cash flow problem," Gannon said, "and the comptroller is putting an end to that."
The budget woes don't impact the county general budget or debt services, he said.
"We have followed all rules and regulations. The commission sets the spending and the tax rate," Gannon said.
The problem dates back to 2011 when the Commission decided to spend down the fund balance, he said. "It's great the first year, but after that it will bite you."
The previous year (2010), Cannon County had a ending fund balance of $1,429,802. By 2011, the fund balance had dropped to $522,682 and continued to drop to $126,539 by 2015.
Having a good fund balance is necessary because of the way Cannon County's taxes come into the budget coffers. Much of the budget is funded by property tax which has a final deadline in February. That leaves the County to pay its bills either from the previous year's fund balance or borrow the necessary funds in the form of tax and revenue anticipation notes.
Comptroller Wilson addressed this problem directly in his letter to the County Commission: (See complete letter on Page 4)
"We understand that as of the end of August 2016, the County had spent 20 percent of its fiscal year 2017 annual appropriations. At this rate of spending, the County will not have enough money to meet its expenses through the end of his fiscal year.
"Cash flow forecasts for the General Fund provided by the County indicate that it spends more than its receipts for seven out of twelve months. As of the end of September, the County has already borrowed $920.322 in tax and revenue anticipation notes, which represent 18 percent of its projected annual cash receipts and are required to be repaid prior to the end of the current fiscal years."
The Comptroller, based upon authority granted by Tennessee Code Annotated, directed the Cannon County Commission to take the following actions to insure compliance with the cash basis budget requirement:
The County's finance staff shall provide budget-to-actual and cash flow reports for all major, special revenue and enterprise funds at each regular meeting of the County commission and furnish copies _ of these reports to the Office of State and Local Finance (OSLF),
the County Commission shall adopt a budget policy approved by OSLF that requires it to maintain a balanced cash-basis budget that only allows spending if cash is available or is approved by OSLF,
the County Commission shall adopt a cash management policy approved by OSLF,
the County Commission shall determine, with the assistance of OSLF, the level of cash necessary to provide working capital sufficient to maintain a balanced budget, and
the County Commission shall cease improper interfund borrowing from its debt service funds to finance general government operations.
This means, basically, the Tennessee Office and State and Local Finance (OSLF) will supervise spending by Cannon County government. (It is important to note that these steps apply to Cannon County government only and not to Woodbury and/or Auburntown.)
"There's the problem. He (the Comptroller) doesn't give you a decision ... it's up to you," said County Attorney Mike Corley. "He's setting the stage where he could force action."
Due to the actions of the Comptroller, Cannon County must stick to its budget for this fiscal year and generally that means cutting spending.
"I know the Commission is trying to do its best to hold down expenditures," Gannon said.
Some services must be provided, by law, including the Sheriff's Department and Cannon County Ambulance Services, he said.
Complicating the situation, is the fact that Cannon County can't change its current tax rate.
"We've got to cut spending and charge for other services," Gannon said.
Commissioner Jim Bush highlighted some issues raised by the Comptroller's office.
Besides the General Fund having a low fund balance, state officials were "really upset" by the Commission funding the R.E.A.C.H. after school program and spending some $177,000 to transport trash to the Middle Point Landfill near Murfreesboro, Bush said.
"I firmly believe if we looked at this like a family would ... and if you don't have it, you can't spend it," Bush said.
Commissioner Russell Reed suggested charging a small annual fee for private trash haulers.
Commissioner Richie Hunter said local contractors need to use BFI or a similar hauler instead of dumping their building scraps at the Cannon County Convenience Center.