As the Jefferson County Commission publicly decries the failure of the Alabama Legislature to pass a new occupational tax and suggests that chaos will unfurl in light of the occupational tax revenues being escrowed during the appeal of the case which held the tax to be invalid, a review of the public financial records compiled annually by the County suggests things may not be as bad as the County Commission would have us believe.
Gregory T. Reagan – a certified public accountant, certified fraud examiner, certified business valuation analyst and forensic accountant – has reviewed audited financial records kept by the Jefferson County Commission as required by State law for the fiscal years of 2000 through 2007, along with the operating budgets for fiscal years 2008 – 2009. The review demonstrates several interesting points, as summarized by Mr. Reagan in an affidavit filed in the occupational tax lawsuit (emphasis added by this author)
The financial statements of the Jefferson County Commission for the year ended September 30, 2007 were audited by an independent certified public accounting firm under auditing standards generally accepted in the United States of America and whose report was dated January 12, 2009, meaning that the disclosures within the audit report convey relevant information about events existing at September 30, 2008 and subsequently through January 12, 2009. As a result, this is presently the most current and reliable information about the Jefferson County Commission’s financial status. I have, therefore, relied heavily on that information in formulating my opinions expressed in this affidavit. These audited financial statements disclose that:
a. all of Jefferson County’s debt obligations, other than the Series 2001-B bonds, are non-recourse as to the General Fund.
b. Jefferson County will have reduced expenditures of $10 million annually starting in 2009 to fund General Fund needs because its final payment from the General Fund to the Birmingham-Jefferson Civic Center Authority was made in December 2008.
c. Jefferson County’s General Fund for the fiscal year October 1, 2006 to September 30, 2007 reported total audited revenues of $263,190,000 and total audited expenditures of $277,818,000 and, therefore, spending exceeded revenues by $14,628,000. The 2007 fiscal year operating results are aberrant to previous years.
The audits performed by the Alabama Department of Examiners of Public Accounts for the period covering the fiscal year ending September 30, 2000 through the fiscal year ending September 30, 2006 (seven years) determined that the Jefferson County Commission’s General Fund produced excess revenues over expenses before other financing uses and sources, which were primarily comprised of inter-fund transfers, in an aggregate surplus of $180,854,000, or an average annual surplus of $25,836,286.
The document entitled Financial Statements All Counties (For the 2007-2008 Fiscal Year), as published by the Alabama Department of Examiners Public Accounts, reported that Jefferson County’s 2007-2008 Fiscal Year General Fund had total revenues of $269,391,000 and had total expenditures of $274,402,000 (including capital outlays that vary annually), and, therefore, expenditures exceeded revenues by $5,011,000.
The Jefferson County Commission’s adopted budget for Fiscal Year 2008-2009, estimates that the General Fund will have total revenue of $289,252,998. The Commission estimates it will spend $303,674,498 for actual services resulting in a deficiency of $14,421,500, which will be fully funded by net transfers from other governmental funds of $14,421,500 resulting in break-even operations for fiscal 2009.
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From fiscal year 1999–2000 to fiscal year 2005–2006, the Jefferson County Commission operated the County, and provided for County governmental services while producing a General Fund aggregate excess of $180,854,000. General Fund expenditures averaged $163,611,000 for the fiscal years 2000 through 2006. These increased to $277,818,000 in fiscal year 2007, with general government expenditures alone increasing to $152,777,000 from $85,949,000. Further, capital outlays increased exponentially from average expenditures of $2,211,000 during the seven years of 2000 – 2006 to a total of $10,083,000 in 2007. This increase alone represents more than 10% of annual occupational taxes. The budget for fiscal year 2008 (the only information available for the 2008 fiscal year) reflected plans to spend $297,220,201 and the budget for fiscal year 2009 reflects plans to spend $303,674,498. Since the County’s current primary financial problems are related to debt obligations that are non-recourse to the General Fund, it is unclear why General Fund expenditures have escalated so significantly in recent years. It seems to me that more stringent spending controls are in order and such should have the capacity to return the Commission to profitable operations without the need for the escrowed occupational and business license taxes and fees. Based on the information provided me to review, it is my opinion that the current Jefferson County Commission should be able to largely replicate the budgetary constraints utilized by the previous Commissions to allow the General Fund to return to a reasonable degree of fiscal discipline necessary to provide basic governmental services without the receipt of the escrowed occupational and business license taxes and fees. Jefferson County’s General Fund has a fund balance of over $40,000,000 at September 30, 2007.
The review by Mr. Reagan begs the question, “What happened in 2007 and thereafter that has lead to expenditures exceeding revenues?” This is the question the County Commission must be held to answer if Jefferson County is to return to fiscally sound operation. If the sky is falling, it is because the Jefferson County Commission has been knocking the foundation out from below with excessive spending. The County Commission clearly should be able to operate the County without the illegal occupational tax. It is time the Commission exercised some restraint and acknowledge the true problem is with its spending – not the revocation of an illegal tax.
