York County could have to pay $21M debt in 2016
York County could be on the hook next year to pay back $21 million in debt it incurred to upgrade its 911 system nearly a decade ago, but officials believe they can get an extension for when the balance is due.
With approval from the courts, the county could get the 2016 payment down to $840,000, which would only cover interest, said county administrator Mark Derr.
"The entire $21 million is due in December 2016," Derr wrote in an email. "Bond counsel believes that, with court approval, we can extend the repayment out over 10 years beginning in 2017."
The $21 million is "stranded debt" because it was used to finance a 911 system that will become obsolete in 2017 when a new, federally mandated upgraded system goes live, Derr said.
Because the existing system will be made obsolete, the county will have to repay the bond next year unless an extension is granted. The county only budgeted to pay $840,000 in its proposed 2016 budget, presented to commissioners on Wednesday.
2017: If the county can stave off having to pay in full, it would mean it would have to make $3.8 million yearly payments starting in 2017, Derr said.
But, the county will also have to take on $5 million to $6 million in additional debt to cover remaining costs from the ongoing $27 million mandated upgrade, which could drive up yearly payments to $4.5 million, he said.
"Coupled with the repayment of the stranded debt, it will have a significant impact on the 2017 budget," Derr said. "The question becomes where will we be next year at this time?"
About five years after the existing system went live in 2008, Congress ordered 911 radio systems to be switched to a different radio bandwidth, following a recommendation from a federal commission formed after the Sept. 11, 2001, terrorist attacks. Under the plan, the county must shift from its current T-band frequency to the 700 MHz frequency, and the federal government has said it would pay back least part of the cost for counties that make the switch.
But Derr said there hasn't been any movement at the federal level to do so.
The ongoing project started in 2014 and the system is expected to go live in 2017.
2016 budget: As part of the 2016 preliminary budget, commissioners are eyeing a 12 percent tax increase to cover a roughly $15 million gap. The $532.5 million budget includes general fund expenses of $212.2 million, an increase of 7.8 percent over 2015.
Under the proposal, the millage rate would increase from 4.52 mills to 5.07 mills, which equals to a $72 increase for a property assessed at $131,345, the average assessed value in the county.
"There's a lot of things that impacted the budget," Derr said. "This has not been an easy budget to deal with."
The last time commissioners increased taxes was in 2013, when the tax rate rose from 4.15 mills to its current rate, an 8.9 percent hike.
The county is projecting increases in numerous areas, coupled with the county's inability to refinance existing debt. Health care costs are expected to increase $4.6 million next year, while the county is expecting to contribute an additional $2.5 million to its pension fund.
In 2015, the county contributed $9.4 million to the pension fund, $1.1 million less than what is needed to fully fund the system. Commissioners committed to making the full contribution of $12.3 million in 2016.
The subsidy to the county-run Pleasant Acres Nursing & Rehabilitation Center will increase by $1.5 million and the Children, Youth & Families budget is to increase by $1.8 million to hire more staff to handle an increase in suspected abuse cases
Through the first eight months of this year, the office conducted 3,044 investigations into suspected child abuse and neglect, a roughly 75 percent increase from the 1,735 investigated for the same period of last year. The county's subsidy to the county-run nursing home is expected to increase $1.5 million next year, for a total of $7.7 million.
Savings: To offset some of the financial burdens, the budget does not include $124,000 in funding requests by county departments and special allocations will remain stagnant at $6.56 million.
The county will also do away with 120 vacant positions, about 80 of which were at the nursing home, in 2016. The positions have not been filled for at least year, Derr said.
But one area the county won't see savings is through debt-refinancing. The county saw about $7 million in savings in 2015 through refinancing, but that option is not available in 2016, Derr said.
Barbara Bair, the county treasurer, said though no one likes tax increases, it's important for the county to continue providing serves at current levels.
"I urge commissioners to do the responsible thing and fund the budget," she said.
Doug Hoke, vice president commissioner, said commissioners and staff will review and possibly tinker with the proposal in the coming weeks.
Commissioners will vote on the final budget on Wednesday, Dec. 23.