Johnson County: Debt Is A Four-Letter Word

James McAfee, a blunt-spoken man, was ruminating about his election as chairman of the Johnson County Commission.

“I took office in 2001,” he says. “It was a nightmare.” What McAfee found waiting for him just after he was sworn in was a county with a population of about 8,700 sinking under debt.

The moment is best described on the county’s application: “The Johnson County Board of Commis-sioners in FY 2002 faced a negative fund balance of $207,965, the required repayment of tax anticipation notes for 2001 of over $800,000 and a 2002 budget with over $300,000 in inflated revenue projections and $150,000 in underestimated expenditures.” Further, the application states, such budget woes had created “a financial storm threatening the fiscal solvency of the county.”

Clearly, something had to be done. Enter Doug Eaves. “The most important decision we made was hiring Doug Eaves,” McAfee says.

Eaves, the county administrator who came aboard in 2002, has an almost manic passion for the minutiae of government finances, the kind of productive obsession that led to the invention of the light bulb. Early on, Eaves called up an age-old proverb: “You cannot borrow your way out of debt.”

“We were in debt,” he recalls. “And borrowing money for operating expenses. The whole procedural setup had been problematic.” His first action was to pull the budget-cutting knife out of its sheath. “Basically, the first year we were here – there were three new commissioners that year – we had to crank down expenditures. We had to cut discretionary expenditures and do what we had to do to maintain services.”

And then Eaves had to go to school. “I went through a financial management program at the [University of Georgia’s] Carl Vinson Institute of Government.” There he had to complete a class project. “My project was to do about four months of research into financial policies around the state to find out what the best financial practices were in some of Georgia’s largest counties,” he remembers.

Being the wonk that he is, Eaves took what he saw as the best big county financial policies and broke them down to see which ones would work best for a small county. “Small counties really don’t have much in financial policies,” he says.

By crafting a plan to fit his lightly populated county, Eaves initiated new accounting practices that would be familiar to the money mangers of any prudent family household. “What we did was put some common sense in the budget process and we got a balanced budget,” McAfee says. “And we’re staying with a balanced budget. It’s an ongoing battle but we are winning it.”

Eaves, working with the commissioners and the county staff, developed formal budgetary policies to make more accurate revenue projections, tighten purchasing procedures, improve capital budgeting, better manage fixed assets and install internal controls. The new policies were followed by a “stringent analysis for compliance with state law … .” None of this is the stuff of high drama, but there were some dramatic results for a small county where every dime counts.

“When I went in we needed a new jail,” McAfee says. “But our financial shape was such that we couldn’t afford it.” And the county’s creditworthiness was questionable.

“We quit borrowing money in 2003,” Eaves says. “And we have really got it turned around. We have a fund now at the end of the year of about $1.5 million. We use that money plus our additional revenues that come in at the end of the year to pay for operating expenses until our taxes come in. Then we just bank that tax money – we have a lot of CDs, so we now are earning interest instead of paying interest.”

Eaves’ voice grows excited as he continues: “And we’ve gone from a negative fund balance of $200,000 to $1.5 million on the plus side. This year [’06] we have $1.7 million in the bank and $700,000 in CDs!”

Johnson County got its new $3.2 million jail, thanks to its new, more solvent government. “It opened in November and was full the first weekend,” McAfee says.

“In addition,” Eaves says, we were able to help the development authority build a new workforce development center at our industrial park. We can do a lot of these projects now where we can front money for grants, something we were never able to do before.”