Conclusion: It is probably an appropriate time for the County Board to review and update the CIP rollover policy, but – in my opinion – there is little in previous or recent CIP rollover practice or policy to preclude the use of current sales tax revenue or unrestricted Social Improvement Fund Balance from being used for debt service for debt previously incurred for North Central Health Care.
Thank you to County staff.
Finance Director Palmer and Corporation Counsel Puerner, with assistance from Administrator Leonhard, provided the documents and background information for my review of the CIP Rollover Policy. They were extremely helpful and very responsive and I thank them for their assistance.
This review and critique of the CIP Rollover Policy should in no way be construed as a criticism of any County staff member. All of the policy documents provided date from 2004 or earlier, so I don’t expect that our current staff had a significant role in the development of the CIP Rollover Policy.
It is the County Board’s role to develop Policy for the County and in regards to the CIP Rollover Policy, I believe that the developed policy is too vague to provide clear and unambiguous guidance to County staff. A policy that can be interpreted however best fits an individual Supervisor’s or several Supervisors’ agenda and goals is not an effective policy and is in effect no policy at all.
Background of Policy Documents1
Finance Director Palmer provided a “Marathon County CIP Funding 101” presentation2 to the HRFC committee earlier this year. The slides from the presentation are shown in the “Source Document” section later in this blog.
Following the presentation, I requested and received the R-124-90 and the 2004 Policy document mentioned in the presentation. It appears to me that the R-124-90 resolution sets up a CIP plan for that year, but does not address a CIP Rollover policy, although the “attached Capital Improvement Plan” is not included, so its contents are not certain.
The 2004 CIP Policy3 discusses a CIP rollover policy in the “Undesignated Fund Balance” Section. The 2004 CIP Policy is “The latest version of the CIP Policy…” per the CIP Funding 101 presentation.
A review of the 2004 CIP Policy raises several questions. The “Undesignated fund balance of several County funds is transferred to the Capital Improvement Fund” This sentence uses the term “funds” thereby implying that more than one County fund is included in the policy, but does not clearly specify which funds are included.
“Those funds that use tax levy to support programs” is also included as a criteria for inclusion in the CIP rollover program. What is “left over” is considered undesignated fund balance.
A partial list of County Fund Balances from the 2022 Audited Financial Statements includes the following Funds:
Please note that I am not advocating in this post that any of these funds should be included in the CIP rollover calculation. I am simply pointing out that the Social Improvement Fund is not the only County Fund that could be included in the calculation and that perhaps other funds more closely meet the vague and ambiguous guidelines listed in the Policy than does the Social Improvement Fund.
For example, the $66,523,955 Highway Fund and the $10,094,475 Employee Benefits Insurance fund would seem to be both at least partially supported by tax levy, but were not included in the general 2022 CIP Rollover calculation.
The following text was included in the 2005 CAFR (Comprehensive Annual Financial Report) and similar text was included in subsequent annual Financial Statements, apparently through 2018.
The statement included in the 2005 through 2018 CAFRs is also somewhat unclear and ambiguous. The statement mentions “unreserved undesignated fund” balance under “Working Capital Policy” but then repeats the language in the “General Fund Balance” section making it unclear which funds the policy applies to. The text specifically includes moving unreserved undesignated “Highway working capital” funds “into the same capital improvement process.” (Please note that I don’t believe that including the Highway funds in the general CIP fund is current County practice and I am against moving Highway funds into the general CIP fund.)
The 2005 through 2018 statement specifically excludes the insurance funds, even though it would seem that the Employee Benefits Insurance fund is at least partially supported by tax levy.
The 2004 CIP policy also states that the undesignated fund balance is recorded, audited, and reported in Marathon County’s Comprehensive Annual Financial Report (CAFR), which does not appear to be current practice.
Summary
The 2005 through 2018 text states that the CIP fund balance “is not used to offset following years operating needs. This philosophy assures that current operating needs are funded with current collections.”
This statement does not preclude using either current collections or existing fund balances from funding debt service from debt incurred from previous CIP expenditures. While the textt says that undesignated CIP rollover funds are used to “fund future years capital improvement programs”, it also states that “the trend of using fund balance and not raising taxes is expected to continue for years to come.” (Emphasis added)
It appears that our County practice relative to CIP rollover changed in 2019 based both upon the recent CIP rollover calculations and the fact that the 2005 through 2018 text is no longer included in our 2019 and subsequent audited financial statements.
It is probably an appropriate time for the County Board to review and update the CIP rollover policy, but – in my opinion – there is little in previous or recent CIP rollover practice or policy to preclude the use of current sales tax revenue or unrestricted Social Improvement Fund Balance from being used for debt service for debt previously incurred for North Central Health Care.
Source Documents
Slides from the “Marathon County CIP Funding 101”
Resolution R-124-90
April 2004 CIP Policy
CIP Page from 2023 Budget Message
Expanded View of CIP Calculation from Palmer’s presentation
- Additional Source Documents
2005 CAFR
2022 Audited Financial Statements ↩︎ - Presentation is Shown Below ↩︎
- Presumably, the 2004 CIP Policy was adopted as County Policy by a Board Resolution, but the Policy Statement doesn’t mention an adopting resolution. I did not request and have not received a copy of a Board Resolution adopting the Policy ↩︎