Former South Winneshiek Superintendent Dick Janson said school and county finances have much in common.
Janson, who frequently attends Winneshiek County Board of Supervisor meetings, recently did some research into the county road department's budget after listening to the annual county audit report presented by Neil Schraeder in March. Schraeder is a certified public accountant with Hacker and Nelson Co. in Decorah.
Janson said one of the supervisors got to the "heart of the matter" when he asked Schraeder how the county compares to its neighbors. Janson said Schraeder responded in some respects, the county is better, in some respects equal, but in one respect much worse: the county's secondary road-use fund balance or solvency ratio.
The fund balance is the ratio of money left at the end of the year, compared to total expenditures. County auditors recommended the fund should be between 25 and 30 percent to be considered solvent, but the county's was 16.9 percent in fiscal year 2012.
The county's road department budget is the largest portion of the county's total expenditures -- 35 percent. State and federal funds account for 73 percent of the department's revenues, local option sales tax, 17 percent; rural property taxes, 8 percent; and general fund levy, 2 percent.
"It has structural and systemic issues," Janson said of the road budget.
The systemic problems stem from levy rates, while the structural problems can be blamed on inadequacy from the state and federal government to help the county meet its road and bridge needs, according to Janson.
As county officials consider a possible moratorium on frac-sand mining, Janson believes roads should be at the top of the list for reasons to impose one. The Winneshiek County Planning and Zoning Commission is holding a "fact finding" public hearing on a frac-sand-mining moratorium at 7 pm. Tuesday, May 14, at the Winneshiek County courthouse.
"The reports of the county engineer to the Board over the last two months have all pointed to the same picture - we're struggling to meet our financial obligations for roads and bridges currently. If there is increased demand on that (with heavy truck traffic mining would bring) it raises the issue 'how is it going to be paid for?' "
Feels their pain
As a former school administrator, Janson said he empathizes with the supervisors.
"I was struck when he (Schraeder) went through the audit, by the similarity between school finances and county finances. And I'm sure the city's finances are similar. They're in that difficult position of being halfway through the current fiscal year and they have to set a budget for the next fiscal year, but they still haven't received the audit from the previous year. In my experience as a superintendent, the way through that is to have trend lines of different fund sources and expenditures," he said.
Janson decided to look at a decade's worth of data pertaining to road department expenses and revenue sources. He presented the information he collected to supervisors in late March.
"I looked at trends ... county boards are in the same positions as school boards ... it's like trying to hit a moving target. You need a multiple 10-year look at components that are problematic," Janson said.
Because property taxes are only collected twice a year, the county runs into situations where they have to obligate money out of the next year's budget to pay for work done in the current fiscal year.
The supervisors recently approved a contract for a project on Pole Line Road and accepted bids for gravel, but said no payments will be made until the work is completed after the start of the next fiscal year July 1.
Steering a ship
Janson said the supervisors are aware of the problems with the road budget but won't be able to begin taking corrective action until work begins on the 2015 fiscal year budget early next year.
"It's like steering an ocean liner, it takes a while to get the ship turned. My experience with funds and getting them turned around is that it generally takes a two-to-three year process in order to restore a fund to a healthy balance. It isn't that the supervisors aren't trying, they are. Their resources are inadequate with the job they have to face," he said.
With the exception of fiscal year 2009, the last time the road budget was considered solvent was in fiscal year 2005, when the solvency ratio was 26.7 percent. The solvency rate in 2009 was 26 percent, due to Federal Emergency Management Agency funding received as a result of the 2008 floods.
"Expenses exceed revenues every year. They're transferring money in from other funds, which they have to do. Money gets transferred from the general fund each year. One hundred percent of the local option sales tax money goes into the rural service fund, then into road-use tax fund," Janson said.
In the past decade, the county has been forced to borrow funds for the road department twice -- $500,000 was borrowed in 2006 and $400,000 was borrowed in 2010.
"It's not an issue of negligence or mismanagement, it's an issue of funds."
"We're at the mercy of a lot of those revenue streams that just aren't working," Winneshiek County Auditor Ben Steines commented. "At some point the public will have to settle with less services. We can't continue to maintain our road system at the same service level we have been with the money we're getting. Whether it's leaving bridges closed or not maintaining some of our gravel roads or not maintaining some in the winter, something will happen if we don't get revenue streams up."
Because the state hasn't raised the fuel tax in 20 years, Steines said there is not as much money to go around.
Due to increased property valuations, the Board is allocating some "extra money" those increased values generated toward road improvement, according to Steines
"We can't plan on it every year. It's a one-time help. It won't solve the whole issue, which is systematic. If something doesn't happen with state and federal funding of roads, the county is not going to be able to foot all the difference. It's a downward spiral," he said.
Steines said 20 years ago the county purchased a new road maintainer every year, and had 14 to 16 of them.
"We've reduced the number of maintainers and we don't buy one every year ... at some point it's going to catch up."
Winneshiek County Engineer Lee Bjerke said the county continues to pay $1 to 1.3 million a year on rock for gravel roads, but that money doesn't buy what it used to.
"We're falling behind horribly. Everybody is calling complaining. They comment the roads were never this bad five or 20 years ago. That's a true statement. Traffic was less and our ability to buy rock was greater," he said, adding that record crop yields and larger farm implements compound the problem.
In the past decade, the price of rock has increased from $4-$5 a ton to $7-$8.
Bjerke said the burden of county roads shouldn't fall on property tax payers.
"We have to get the gas tax figured out. Everybody is fighting it, but 15 percent of the tax is paid by people who don't live in the state. It hasn't been raised since 1989," Bjerke said.
But as cars become more fuel efficient, the funding mechanism for roads will have to be restructured, he added
In the past year, the county engineer was forced to close six bridges for structural problems, and he anticipates more will be closed in the future.
"We try to come up with low-cost solutions to keep some of them open, but we're falling behind. We can't keep up. It comes down to funding sources," Bjerke said.
"It's kind of frustrating. We're literally going backward and the public is seeing it, to the point where the public is going to lose it. Our roads are really, really bad. I've been saying it for five or six years and the Legislature kicks the can down the road."
Board of Supervisors Chairman John Logsdon said, as a former school administrator, Janson understands how decisions in Des Moines "cover all sorts of facets of local government now, whether it's the gas tax, allowable growth or property tax relief."
"It seems they (legislators) don't know what to do when they have no money and they don't know what to do when they have the money," he said referring to the state's budget surplus. "Things that affect an average Iowan's life - like property taxes and road infrastructure - all become political footballs."