County may dig into reserve funds

January 21, 2011
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Kent County commissioners will decide this week whether to appropriate about $150,000 from the unreserved and undesignated fund balance of the general operating budget and another $3.8 million from the aeronautics fund reserve.

The aeronautics appropriation is likely to be an easier task, as members of the county’s Finance Committee last week expressed hesitation about transferring any money from the general fund reserve. Still, they agreed to recommend to the full board that the transfer be made. The reserve has a balance of $8.76 million.

All but a tiny portion of the monies being requested from the general fund reserve, $148,845, would go to the 2010 Treasurer’s office budget to cover banking fees incurred by the county over a 15-month period that began in 2009 and continued throughout last year. The charges are for administrative and service fees billed by Chase Bank; funds to meet that expense weren’t in the Treasurer’s budget last year.

“Since interest rates have significantly declined, the earned interest credit is no longer sufficient to offset bank fees and the credit rate is not competitive to many other interest-bearing investment products,” said County Administrator and Controller Daryl Delabbio.

“It is recommended, going forward, that bank fees be accounted for as an expense,” he added.

County Treasurer Kenneth Parrish said up to two years ago that the earnings credit that the county received from its checking accounts covered the fees, which meant those charges weren’t booked as an expenditure. That credit averaged about 2 percent each year on the county’s checking accounts, which have a total balance of $6 million. But he said last year the credit fell to 0.2 percent.

Parrish also noted that the checking accounts would have needed a $60 million balance to have earned a credit large enough to pay for the fees. He said instead of depositing an additional $54 million into the checking accounts, he felt the county could get a better return by putting those dollars in certificates of deposit, and he did that last year. He also switched banks.

“These (fees) were all when we were with Chase Bank. We’ve since changed banks,” said Parrish. He said the fees averaged $7,000 a month for the 30 Chase accounts. Parrish said Huntington Bank was the lowest bidder for the county’s checking business, offering a better earnings credit.

Parrish said the county likely picked up about $750,000 in investment income last year by buying CDs instead of putting those dollars into the checking accounts. “We probably earned $750,000 in revenue because we were investing it wisely. It went into investment income,” he said. “Had we not made this change, the county would have been more than $300,000 to the bad.”

Several commissioners on the Finance Committee wanted to know why a request from the general fund reserve was being made in 2011 when the fees date back to 2009. Parrish said the county was billed for the charges in 2010, even though some of the fees went on the books the previous year.

“I readily acknowledge that I missed a request for a line item in 2010,” he said. “Had the auditor caught this in last year’s audit, we wouldn’t be here asking for the change.”

Commissioner Jim Saalfeld, who sits on the Finance Committee, felt there were a lot of things going on with this request. “But I feel satisfied after hearing the explanation as to why we’re doing this today,” he said. The committee also recommended that the board appropriate $750 from the same reserve for the 2010 Veteran’s Affairs budget. That money will be used to pay for group insurance and other items.

As for the $3.8 million transfer from the aeronautics reserve to the 2010 Gerald R. Ford International Airport budget, the money is needed to cover two expenditures. One expense wasn’t known when the spending plan was put together in 2009, while the other expense turned out to be higher than projected.

GFIA Finance and Administration Director Brian Picardat said $700,000 was spent last year to market the arrival of two new airlines to the airport — AirTran Airways and Frontier Airlines — and the new destinations added by Allegiant Air. Picardat said spending on those items is a regular policy of the county’s Aeronautics Board, but members didn’t know the two airlines would be coming to the airport or new destinations would be added when they approved the budget.

“But the big one was depreciation. The depreciation of our parking structure was higher than expected. Going forward, we should be fine,” said Picardat of the $3.1 million depreciation charge. “We do have the revenue to cover all of this. We generated over $9 million in operating revenues. We’re fine. We just didn’t expect our depreciation number.”

The airport set a new passenger record last year with 2.18 million flying out of GFIA. The 2010 total topped the previous record of 2.15 million that was established in 2004 and was 29 percent higher than the 2009 number. The airport will hold a “passenger appreciation day” Feb. 14 to mark the record.

The Finance Committee recommended transferring the funds from the aeronautics reserve to the airport’s budget. County commissioners will make their decisions on the requests from the airport and the Treasurer’s office Thursday.

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