County audit report, credit score show growth

By Catharin Shepard • Staff Writer • Hoke County’s finances are doing well with a General Fund balance several times the required minimum and a good credit rating, according to audit and financial reports.

The audit was completed on time, and showed continued improvement by the county staff members who prepared it, Kotang Cha-Moses of Martin, Starnes and Associates said. Cha-Moses presented the annual report Monday night at the Hoke County Board of Commissioners meeting.

The county’s revenues in 2020 totaled $54.5 million, up from the $49.7 million of the previous year. The total expenditures were also up from 2019, to $48.6 million from the $44.9 million of 2019.

The additional revenue mostly came from increases in property tax valuation from the 2019-2020 fiscal year. The increased expenditures included hazard pay and overtime pay for public safety employees and funds used for cleaning buildings, both related to the COVID-19 pandemic.

The county’s General Fund balance continues to stay high, with a total balance of $30.4 million, an increase of about $3.3 million from 2019. That represents about a 47 percent fund balance in total, compared to a state average of 33 percent.

The state Local Government Commission (LGC) requires counties to maintain at least an 8 percent General Fund balance in reserve, in case of emergencies. The 8 percent of its yearly budget is how much it would cost a county to keep paying its bills for one month if, in an emergency, all incoming monies stopped. Hoke has enough money in its savings fund to ride out about six months in the event of a long-term emergency, Cha-Moses said.

“We’re well taken care of,” Commissioner James Leach commented.

Money in the General Fund is broken down into five different categories: non-spendable, restricted, committed, assigned and unassigned. The first four categories represent money that’s tied up or committed for one reason or another, or would require the commission to take an extra step to use it.

Of the $30 million in the General Fund, the county has about $15 million of unassigned fund balance it could spend without needing to take any extra steps, Cha-Moses explained. That’s about 30 percent of the county’s yearly budget.

“If you’re looking to spend fund balance, you want to look at your unassigned fund balance number. That takes into consideration anything you’ve internally designated, in addition to any external designations,” she said.

The General Fund’s unassigned balance saw a slight decrease over the prior year due to a building project. The county used about $4 million of that money last year to pay for construction of the Robert A. Wright Hoke County Agricultural Building.

“We funded the ag building at four-point-plus million dollars, that was transferred out,” Commission Chairman Harry Southerland noted.

The county’s top three sources of revenue are ad valorem property taxes, local option sales tax and restricted intergovernmental funds. The county had a slight increase in tax collection in the last fiscal year, up to a collection rate of 96.6 percent.

The top expenditures were for public safety (the Hoke Sheriff’s Office), human services, general government expenses and local education. Those four categories made up $41 million of the county’s budget in 2019-2020, accounting for 86 percent of total expenditures.

The commissioners thanked County Manager Letitia Edens and county finance staff for their work.

“Congratulations staff again on a job well done, we appreciate that hard work,” Southerland said.

Hoke’s credit score

The board also received a report from Davenport examining Hoke County’s credit rating, in the context of preparing to consider financing options for several county construction projects in the near future.

The county’s credit position is “high quality” with “very strong” budgetary performance, budget flexibility, liquidity and institutional framework, and adequate management, according the credit rating analysis. The county is slightly weaker than the median U.S. counties rating, hampered somewhat by “a weak economy and a small tax base with a below average wealth and income profile.”

Hoke has an Aa3 rating by Moody’s Investors Service (May 2020) and an AA- rating by Standard and Poor’s (February 2020). That’s comparable to other North Carolina counties such as Beaufort, Bladen, Columbus, Montgomery, Richmond, Sampson, Warren and Wilkes, among others. North Carolina counties have an “institutional framework” rating of “Aaa,” or very strong, according to Moody’s.

Other notable credit factors from the Moody’s issuer comment report included that the county has a “robust financial position,” and “low debt and pension burdens.”

“The county has a satisfactory economy and tax base, but they are unfavorable relative to the Aa3 rating assigned,” the comment stated.

Standard and Poor’s future outlook for Hoke was generally favorable, due in part to the influence of Fort Bragg.

“The stable outlook reflects our opinion that the county will maintain very strong financial performance, with manageable debt and pension obligations, and that the local economy, anchored by Fort Bragg, will remain stable and steadily grow. We do not expect to change the rating within the two-year outlook period,” the report stated.

S&P could raise the rating if the county’s underlying economic metrics improve to levels more comparable to higher-rated peer counties; and if the county “formalizes and implements additional more comprehensive management policies and practices,” the global ratings firm determined. On the other hand, S&P could lower the rating if the county experiences financial pressure that forces leaders to make “sustained draws” from reserve funds.

Hoke has about $30.6 million in outstanding debt it is currently paying off, most of which – about $21.6 million – is for county schools.

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