Tuesday, July 18, 2000

Auditor: Budget woes ahead

Rhodes says stadium tax too little for debt, promises

By Dan Klepal
The Cincinnati Enquirer

        The debts will be paid, but promises might be broken.

        That's the concern of Hamilton County Auditor Dusty Rhodes, who said he doesn't think the county can afford two stadiums and the promises made during the 1996 campaign to raise the county sales tax — property tax breaks and $5 million per year to Cincinnati schools.

        Mr. Rhodes signed a document Monday that certifies the half-penny sales tax has raised an average of $57.5 million during the past two years.

        The signature allows county officials to take out a $225 million short-term loan. That loan pushes the county's total debt to more than $1.1 billion for the first time in history.

        Mr. Rhodes predicts trouble starting in 2002.

        That's when the $57.5 million in sales tax revenue will be spread too thin to cover $39 million in debt service, $18 million in property tax relief and $5 million to the schools, he said.

        “They're playing it awfully, awfully close,” Mr. Rhodes said. “We are saddling future generations with a ton of debt, and the promises they've made are in jeopardy.

        “There's just no wiggle room left.”

        But Ted Ricci, the county's chief financial adviser, said the money for tax relief and the schools is safe.

        Mr. Ricci said all of the borrowing will not cost the county $39 million a year. He said that is a placeholder number, and that the actual debt service will be lower.

        He couldn't say how much lower.

        “We will structure our long-term bonds in a way that will be less than that,” Mr. Ricci said, referring to the $39 million in debt service.

        “I can't say what that number will be, but it will be

        low enough to make sure we don't touch the property tax rollback and pay every other cost,” he said. “We'll back into whatever that number has to be.”

        The county's political leaders have vowed time and again not to break their sales tax promises. Every financial move they make has those two issues in mind, Commissioner Bob Bedinghaus has said.

        But the law says that every penny of sales tax revenue goes to pay off the debt first. Anything left over can then be used for political promises, such as tax breaks or schools.

        Mr. Rhodes asked Hamilton County Prosecutor Mike Allen if he could figure the cost of those promises into his calculations. The answer came in July 11 letter from Mr. Allen.

        “It is our opinion that you are only to estimate the average sales tax proceeds for the prior two years,” the letter states. “Sales tax revenues will then be available to pay off the ... bonds without respect to other obligations or commitments made by the Board of County Commissioners.”

        That doesn't sit well with Tim Mara.

        A Cincinnati lawyer, Mr. Mara collected more than 90,000 signatures forcing Mr. Bedinghaus to place the sales tax increase on the ballot.

        Before Mr. Mara entered the picture, Mr. Bedinghaus and then-Commissioner Guy Guckenberger had approved the increase without a popular vote.

        Mr. Mara said those promises of tax relief and school funding were crucial to the sales tax winning favor with non-sports fans.

        “It seemed strange to a lot of people to spend big bucks on a stadium when their schools were falling apart,” Mr. Mara said. “I think Dusty's concern is legitimate. There isn't a lot of margin for error.”

        Mr. Ricci admitted that the county is dependent upon sales tax revenues growing 3 percent every year in order to keep the county in the black.

        He called the projected growth “very conservative.”

        “Do we use every bit of that? No, but we try to come close,” Mr. Ricci said. “Is the county imprudent in predicting its ability to finance these projects based on a very conservative growth rate?

        “We think it's very pru dent.”

        Documents provided by the county show sales tax has grown at an average of 7.4 percent since 1970. That growth has been 4.9 percent since 1990 and 5.0 percent since 1995.

        That same document shows four times in 30 years when the sales tax growth has been less than 3 percent.

        “They're banking on a very rosy economic future,” Mr. Rhodes said.


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