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Annual Financial Report Reflects Positive Fiscal Results

Roads, Fire Companies & Capital Projects Allocations Proposed

Post Date:12/10/2019 4:34 PM

December 10, 2019

ELKTON, MD. – In this morning’s work session, Director of Finance, Lisa Saxton and Deputy Director, Jeffery Koss, presented Cecil County’s Comprehensive Annual Financial Report (CAFR) for the year ending June 30, 2019.

Pursuant to the Cecil County Charter and Maryland state law, local governments are required to prepare a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. The report consists of management’s representations concerning the county’s financial position and results of operations.

The CAFR adheres to the County’s new fund balance policy that was approved during fiscal year 2019. Changes to the Fund Balance policy supports an Emergency Reserve Fund (Rainy Day fund) that was increased from 7.5% of General Fund Revenues to 10%, and a Budget Stabilization Fund at a level of 1% of actual General Fund Revenues.

In addition to these reserve fund requirements, the policy established that the County shall maintain a total available reserve, including the Emergency Reserve, Budget Stabilization Reserve and Unassigned General Fund Balance of no less than two months of actual General Fund revenues for the current fiscal year. The CAFR reflects the County’s ability to remain within these spending guidelines.

Due to growing business and economic development in the county, and as a result of the conservative strategies applied by the financial team, the County Executive recommends the assignments of available fund balance totaling $6,350,000.  The key components of these assignments follows:

County roadways are critical to our day-to-day operations. Police officers, paramedics, volunteer fire companies, schools, and the workforce require roads infrastructure to be maintained in such a way to ensure safe travels for all of our citizens.

In 2009, the State of Maryland cut Highway User Revenue (HUR) to all county governments to balance the budget at the State level. In real dollars, Cecil County lost approximately $5,000,000 annually over the past ten years or $50,000,000 in revenue that went directly to fix and maintain the road infrastructure in the county.  Since that time, the County has struggled to keep up with maintaining over 600 miles of County roads with very little assistance from the State HUR funding formula. 

County Executive McCarthy’s administration recognized the critical need facing our road infrastructure, but, realized that without State fiscal support the roads in the county would be a significant challenge to maintain.  As a result of new strategic initiatives to address revenue shortfalls and the growth in commercial and business investment, the County Executive is able to assign $3,000,000 of additional funding in FY2020 directly to improving County road infrastructure. The proposed allocation will allow the County to address road infrastructure without dependence on the State, however the deficit created by lost HUR funds will take many years to overcome. Of the funds assigned to roads infrastructure, $2,000,000 will be allotted to additional asphalt overlay on roads (to be determined), and $500,000 will be expended on additional asphalt patching on roads (to be determined).

The ability of the County to fund the requested equipment needs to support all of the volunteer fire companies, within the normal budget cycle, has been a significant challenge as the County Executive continues to balance the operating budget without the use of unassigned fund balance.  However, at the end of FY2018, and now again at the end of FY2019, the County has the resources available to address the entire budgeted request of the volunteer fire service.  An excess of $1,000,000 has been available each year to purchase new fire equipment to serve County citizens.

Specifically, this assignment of fund balance made by the County Executive provides $325,000, carried over from FY 2019, for an engine to be housed at Chesapeake City Volunteer Fire Company. An unfunded FY 2020 budget request of $575,000 is also being accommodated for an engine at Singerly Fire Company, an ambulance for Water Witch Fire Company and an ambulance for North East Fire Company.

To construct new schools, libraries or bridges, the County must include projects in the Capital Budget and then borrow the funds over an extended period of time to cover costs. The County is constantly monitoring its level of debt and manages to stay within its own debt affordability limits in spite of the never ending list of needs. As the County borrows funds to spend on the new library or replace a county bridge, the interest expense to borrow those funds is a necessary reality to achieve project completion. The last time the County could afford to use a substantial amount of cash to help pay for a capital asset was in 2014. 

The list of capital requests is always in excess of what the County can afford to borrow. Again, as a result of addressing revenue shortfalls and attracting the growth in investment in the County, the administration has the ability to address a portion of its capital needs without borrowing the money.  The County’s financial position at the end of FY2019, has allowed for $2,400,000 in capital asset investment without accruing interest.

The legislation to support these efforts will be introduced to the Council for approval beginning on December 17, 2019 and will continue over the following months.

“This is all good news and I pay tribute for this success to our Finance team,” said County Executive McCarthy. “The refinement of our fund balance policies, as well as our ability to budget without the use of unassigned fund balance, along with strong economic growth is reaping dividends. We need to stay the course to be able to meet the County’s growing demand for additional capital and operating resources and at the same time prepare for adverse economic conditions and a declining economy in the future.”


Media Contact:
Jennifer Lyall
Public Information Officer
Cecil County Government

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