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Commissioners warned that, without a tax rate increase, county faces insolvency

BROOKSVILLE — Hernando County government will likely become insolvent in the near future unless the County Commission acts to increase revenues, the county attorney's office warned on Thursday.

In a six-page memo to the commission and County Administrator Len Sossamon, assistant county attorney Jon Jouben details all of the bleak financial news facing county leaders. The analysis comes as the commission prepares to consider raising the county's property tax rate at a special meeting scheduled for Tuesday.

Jouben's memo comes after grim warnings from the county's budget manager this week and pleas from the property appraiser, the tax collector and the county's chief financial officer to raise the tax rate.

The projected shortfall in the county's 2012-13 budget tops $6.3 million. Commissioners learned this week that there is only $7.5 million in currently provided county services that are not mandated by law. Among the targets for cuts: parks, recreation and libraries.

The picture was made even more dire when Property Appraiser Alvin Mazourek came forward and outlined another potential revenue shortfall of $3.2 million in 2013-14 if several statewide tax-cutting amendments are approved by voters in November, if property values continue to fall and if sinkhole claims continue to increase.

"Please note that the above-stated budget projections are optimistic,'' Jouben writes.

That's because they do not include some other pricey items, including a $4 million backlog of Medicaid payments the county might have to make to the state over the next five years and the cost of a proposed new radio system that would run $1.5 million a year over the next three years.

The county also faces the potential that the state Supreme Court will require it to pay back the 3 percent in employee retirement withholding. In addition, if the voters turn down a mosquito control tax in November, the general fund would have to pick up the expense.

"The county could also be faced with a liability that cannot be anticipated,'' Jouben wrote. "Finally, the county would likely face a downgrade in its credit rating, raising its borrowing costs. The occurrence of any one of these events would render the county's general fund insolvent.''

Jouben outlines why the use of existing reserves would not be a good option for solving this year's budget crunch. The county's budget manager, George Zoettlein, has repeatedly told commissioners that they should not continue to use reserves to balance their budget because that would violate county reserve policy.

Even though the county still has $7 million in a judicial fund, using that to strike a balance "would push the county to the brink of bankruptcy in fiscal year 2014,'' Jouben wrote.

The 2013-14 budget year will see another challenge as well because the county expects state library grants to be used up, adding another $2 million to the deficit. Jouben adds up the impacts and tells commissioners that the deficit could hit $10 million.

If the county's general fund were to land in insolvency, Jouben said the county might be forced to enact tax levies to meet its needs, or file for Chapter 9 bankruptcy.

"The county must take any steps necessary to ensure the general fund's continued solvency,'' Jouben concludes.

Zoettlein told commissioners this week that raising the tax rate by 0.9 of a mill would wipe out the county's current shortfall. That increase would amount to 90 cents in tax per $1,000 of appraised taxable property value. For the owner of a $150,000 house with a full $50,000 homestead exemption, that would amount to a $90 increase in the tax to support county services.

The commission's special budget meeting begins at 9 a.m. Tuesday in the commission chambers of the Hernando County Government Center in Brooksville.

Barbara Behrendt can be reached at behrendt@tampabay.com or (352) 848-1434.

Commissioners warned that, without a tax rate increase, county faces insolvency 06/28/12 [Last modified: Thursday, June 28, 2012 8:36pm]
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