Warren County, Ohio, debt free - and proud of it

Gannett

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• U.S. and World News

LEBANON, Ohio -- As the nation teeters on a fiscal cliff due to growing deficits, one Ohio county is sitting pretty.

Warren County is one of nine Ohio counties with no general obligation-limited tax debt as of Dec. 15, according to a Cincinnati Enquirer analysis of financial data provided by the Ohio Municipal Advisory Council. The other eight are generally more rural than Warren.

"Some governments prefer to pay as they go and do much less in terms of the scale of their capital projects so that they can finance a lot of current operations," said Mark Robbins, a professor in public policy at the University of Connecticut.

That's the approach in Warren County, which has grown rapidly as a Cincinnati exurban area and held down property taxes. It pays cash for big-ticket items, including $12 million for a new administration building in 2001. But there's a downside. Its Common Pleas Courts Building, for example, has employees working in hallways because of overcrowding and commissioners' refusal to go into debt for a large expansion.

Warren County's conservative approach - "aversion to debt," Commissioner Dave Young calls it - dates to the late 1980s, according to former Commissioner Mike Kilburn, who served 28 years on the board before leaving office two years ago.

Kilburn, a new commissioner in January 1983, recalls that the county couldn't meet its payroll. So a bank advanced the county $500,000. Kilburn said he and other commissioners asked, " 'Do we need it? Can we afford it?' And many times the answer was no. ... We just ran that budget like it was our own company (and) like it was our own money."

The county has experienced tremendous growth during this period. Its population more than doubled from 1980 (99,276) to 2010 (212,693), making it the second fastest-growing county in the state.

While Warren's approach is uncommon in Ohio, Robbins said it's not that rare for local governments to have no general obligation debt because other forms of financing are available. Those include leasing arrangements and revenue-backed debt that's not general obligation.

General obligation-limited tax debt is approved without a vote of the public and is backed by the county's full faith and credit, an unconditional pledge to pay debt. The county can raise taxes to pay for general obligation debt and the debt is paid with any general revenue such as court fees, or sales or property taxes.

"General obligations have the advantage of ... offering the lowest borrowing costs for the governments that use that form of financing," Robbins said.

Nearby Hamilton County, also growing strongly, has $753.6 million in sewer revenue bonds and $19 million in parking revenue bonds for riverfront garages, in addition to its $76 million general obligation debt. The median debt for Ohio's counties is just under $7.3 million; Hamilton and others are above this level and half (including Warren) are below it.

Warren County has $30.2 million in other types of debt for such things as road, water and sewer projects.

Young said his county has a philosophical approach of spending only what the county collects in revenue. Also, he said the county has had the foresight to plan and pay cash for big-ticket items.

Kilburn said that during his tenure Warren County paid cash for a new juvenile detention/juvenile-probate courts building (1995), an expanded jail (1996) and a new administration building (2001). What really helped was that commissioners "had the courage to increase our sales tax from 5.5 percent to 6.5 percent," which was done in anticipation of building a new 911 center. (Ohio's sales tax is 5.5 percent and localities can pass an increase and keep that portion.)

The frugal governance has enabled Warren County to:

• Have the lowest county property tax rate in Southwest Ohio.
• Consistently give raises to county employees. Non-union workers have received increases of at least 2 percent every year since 2002, except in 2010.
• Avoid layoffs during the current economic downturn. The one exception? The county let go a building inspector about three years ago due to the housing slump.
• Maintain a sizable reserve fund. The county is projected to have about a $20 million reserve fund next year.
• Have a higher bond rating (i.e. credit score), which allows a county to borrow at a lower interest rate. Of course, Warren isn't interested in taking on debt.

But being so careful with money comes with consequences, including:

• The county has "fallen significantly behind in vehicle replacement" for the sheriff's office, according to Sheriff Larry Sims.
• The average daily population of the county jail in 2010 (266 inmates) exceeded its 207-inmate capacity. Double bunking has increased capacity to 280. The county used to send inmates to Butler County but is now housing all of itsprisoners.
• A planned $6 million building that will be built next year next to the Common Pleas Courts Building will solve the space problem at the courts building for only about a decade.
• Increased costs (inflation) for capital projects as the county waits to save the money.

Warren County Administrator Dave Gully said the county has deferred many capital projects because of the economy. He said three years ago county buildings "were in horrible shape" because of deferred maintenance. Problems included roof leaks, foundation leaks and electrical and plumbing problems. He said the county has caught up on about 50 percent of them. He said some buildings still have major roof issues and the remaining 50 percent will be done during the next three to five years.

The tough task ahead for Warren County is how to stay debt-free as the county continues to grow.

Gary Mattson, associate professor of public administration and public policy at Northern Kentucky University, said a growing county that keeps a no general obligation-debt policy can't keep up with its infrastructure needs. He said counties in Florida in the 1970s and '80s fell behind on infrastructure such as widening roads, building improved water and sewer lines and constructing fire stations.

Mattson recommended that Warren County update its public works facilities and expand its jail. He said the county's new building next to the common pleas courts building should be built to meet the county's needs for about 20 years, not a few years. Otherwise, "You're always playing catch up," he said.

But Young said he has no intention of borrowing money for daily operations and is against raising taxes.

"We live within our means," Young said. "The most successful thing we do in Warren County is having the ability to be able to tell people 'no.'"

Longtime resident Van Harlingen of Turtlecreek Township said commissioners are doing a responsible job.

"One of these days this economy will turn around and you'll start seeing this county blossom and I think it'll be because our commissioners have been careful with the money," she said. "We won't be saying 'OK, we're ready to build an arts center' and they're going 'Oh, sorry, we're in debt.'"

Paul McKibben, The Cincinnati Enquirer