Too Much County Cash on Hand?

Graphic shows the growth in the county government's cash on hand in recent years. The April 2014 rate (not shown) is the highest ever for that month, at about $360 million.

There is one point on which everyone involved in this story agrees: The Arlington County government has significantly more cash in its coffers at any one time than it did a decade ago.

Is that extra cushion a mark of good fiscal stewardship, or of a bureaucracy addicted to squirreling away cash? That’s where the viewpoints divide.

“Year after year, the number of pots [where cash is held] increases, the money in each of the pots increases,” said county Treasurer Frank O’Leary, no fan of the rising cash balances.

“It’s mystifying,” said O’Leary, who fears all that surplus cash does little good for taxpayers or those who rely on county services. And by keeping a huge reserve, he contends, “it’s causing us to pay more taxes than we should.”

Despite tough economic times, the past decade has seen a huge spike: In April 2004, cash on hand stood at $69.35 million; in April 2013, it was $289.1 million, an increase of nearly 317 percent. Over the past 10 Aprils, the total on hand was higher than a year before nine times.

(April is a good comparative month, because it is the point in the county government’s fiscal year when the least amount of cash is on hand. October is the high point, due to an influx of real estate and personal-property tax revenues. The total amount on hand in October 2012 was $574.2 million, the highest in history, according to an accounting from the treasurer’s office.)

Not surprisingly, top county-government officials take a different view of the situation.

“We don’t want to keep a lot of cash on hand,” said County Manager Barbara Donnellan, who huddled with Department of Management and Finance director Michelle Cowan and budget director Richard Stephenson to walk the Sun Gazette and its readers through the reasons behind the large increase.

It is, Donnellan said, “legitimate” to be asking questions. But the underlying cause of the increase in funds on hand is because “we’re reinvesting in our community,” the manager said.

What has changed in the years between fiscal 2004 and fiscal 2013? The differences include:

* County officials have increased the amount kept in a dedicated reserve fund from 2 percent to 5 percent of the General Fund balance.

* The county has begun accumulating funds from the 12.5-cents-per-$100-assessed-value surcharge on commercial property, little of which has yet been spent.

* There’s a new tax-increment-financing fund for Crystal City transportation improvements.

* There’s a new fund for improvements to the county’s stormwater system.

Trying to factor out those new funds in an effort to see how much the unreserved balance has grown in the past decade has proved an impossible challenge, although Stephenson acknowledged that “logically, it would be more now than 10 years ago.”

John Tuohy, a deputy treasurer whose bailiwick includes investment of government funds, said that with all the additional funds, it would be better to have a clearer understanding of what county dollars might be needed to be spent in the near term, and how much can be invested over a longer period to obtain a higher interest rate.

Currently, “it’s impossible to tell what cash is in different funds,” he said.

If those inside the county government have a hard time with the issue, those outside face even more difficulty in determining whether the government has too much cash in its coffers.

While suggesting that, on the surface, the growth in the county government’s cash on hand appears “nothing less than exorbitant,” Tim Wise, president of the Arlington County Taxpayers Association (ACTA), says any analysis needs to account for nuances.

“It’s almost certain that it’s not a black-and-white situation,” he said. “It’s likely there is a large grain of truth that both the treasurer and county manager are correct when they say the county is cobbling money away or that it’s more complicated, respectively.”

To provide more oversight, ACTA has pressed for creation of an independent inspector general within the county government. So, too, has the Arlington County Civic Federation. County officials have shown no interest in establishing such a position.

Wayne Kubicki, who may know more about the county’s budget process than anyone outside the government, notes that over the past decade, when the resident population is higher by 8 percent, annual county operating expenses are up 50 percent, total bonded debt is up 61 percent and tax-supported debt service is up 67 percent.

“With this debt and budget growth, you’d expect our cash on hand to be higher – and there are a lot of ‘moving parts’ [that make up the total],” Kubicki said.  

Like nearly everyone else, he acknowledges the difficulty of stripping down the data to reach easy conclusions.

“Isolating the individual components of our cash on hand at a single point during the fiscal year would be difficult and possibly misleading, due to the timing of specific tax receipts and disbursements,” Kubicki said. “What I’d like to see from county staff is an analysis by year, from year-end fiscal 2004 to fiscal 2012, showing the components of fiscal year-end cash for each. Such an analysis would serve to better tell us what the treasurer’s chart does – or doesn’t – mean.”

O’Leary, who office is independent of the county government but relies on the County Board for most of its budget, takes care to say there’s no malfeasance involved.

“I don’t think it’s criminal,” he said, suggesting it rather was a culture of caution and “fear of [new] things” by top county staff.

Staff respond that O’Leary’s office may be missing parts of the overall picture.

“He doesn’t do day-to-day operations,” Stephenson said. “I don’t know if we’ve spent the time with the treasurer . . . to have him understand.”

County Board Chairman Walter Tejada said he’s comfortable with having a “substantial cushion,” just in case.

“We’d rather err on the conservative side,” Tejada said.

If the county suddenly started drawing down its reserves, “then it would be [people saying], ‘Why is the county willy-nilly spending money?’” Tejada told the Sun Gazette.