Two county officials are at loggerheads over Cambria’s financial outlook for the rest of 2014, with one supporting major refinancing and the other hoping to buy some time.
During an editorial board meeting at The Tribune-Democrat last week, county Controller Ed Cernic Jr. painted a grave picture for the county through the remainder of 2014, going so far as to predict possible default by late summer.
While real estate taxes are coming in, the money is being paid out to cover overdue bills from earlier this year, the veteran controller and Johnstown businessman said.
Still unpaid are the millions of dollars due county-related agencies, money borrowed late last year to make payroll and other expenses, he said.
The tax dollars are ones that should be piling up in the bank to help the county through leaner months later this year, he said.
“We are going to default this year if nothing is done,” Cernic said. “I believe if they (commissioners) do not do anything, we will default in August.”
By late summer, the tax payments will have all but dried up and a $5 million loan taken out in late 2013 must be repaid in July, Cernic said.
President Commissioner Douglas Lengenfelder has a different view, and while he stopped short of accusing Cernic of crying wolf, he said he is reasonably certain bills will be paid.
“In 2012, he said we were going to default in November. In 2013, he said we were going to default in September or October,” Lengenfelder said. “Now it’s August or September.”
Cambria has yet to default and it’s something that will not happen under his watch, Lengenfelder said.
However, those warnings of past years, Cernic said, show the financial crisis is hitting earlier every year.
“The balloon is getting bigger, the snowball is getting bigger, and at some point in time they’re going to have to raise taxes,” Cernic told The Tribune’s editors.
Lengenfelder points to negotiated contracts in place before the current board came in office as a major stumbling block, employee costs exacerbated by raises to nonunion workers to correct an inverted pay scale.
In addition, the same year the current board took over, the state changed its payment schedule for agencies it helps fund from a $6 million payment in July to quarterly payments.
Lengenfelder, now in his third year as a commissioner, points to efforts he and fellow Commissioners Thomas Chernisky and Mark Wissinger have made to reduce costs.
More than $5 million in savings since 2012 has been documented, he said, including a reduction in employee numbers from 1,000 to 823 at last count.
As Cernic and Lengenfelder disagree on the state of the county’s finances, they also disagree on what should be done if things spin out of control as the year moves on.
The controller has a plan waiting in the wings to refinance all of the county’s more than $56 million debt, a move that would reduce the annual debt service by about $2 million for each of the next couple of years.
“It’s the right thing to do for the people and the taxpayers,” Cernic said.
The refinancing would include everything from debt on the prison to existing debt on Laurel Crest Manor, what was until a couple of years ago the county’s nursing home.
It carries a price tag of about $10 million in additional debt and repayment would be pushed out several years beyond the payoffs on the current schedule.
If the process were started now, the refinancing package could be in place by late summer, Cernic said. There are no guarantees if action doesn’t come soon.
Time is of the essence, Chernisky said, adding it might be wise to follow Cernic’s advice.
“I think Ed Cernic has some pretty good ideas and we need to look at this debt right now,” he said.
Lengenfelder and Wissinger are not convinced the county will not be able to make it through another year.
Lengenfelder said he is comfortable watching the situation through April and into May.
“I don’t think our county is going to default. I don’t think anybody in this county is going to let that happen,” Lengenfelder said.
If money gets too tight, he said, he for one would look at cutting hours or laying off non-essential employees.
That option is not being embraced by Chernisky or Wissinger.
Chernisky was emphatic.
“Right now that is not an option in my mind,” he said. “That is not where I want to go.”
Wissinger hopes for another solution.
“We’re just looking at every possible scenario,” he said. “When you have a tax base that’s not growing, you have to look at every possible option.”
The three commissioners are taking a good look at the financial picture, both now and what potentially lies ahead, Wissinger said. As of yet, he’s not convinced refinancing debt is the answer.
“When you restructure, you add debt. You have money up front, but ultimately somebody has to pay for it,” he said. “Maybe that’s the way we’ll have to do it. If so, we’ll look for the best possible deal.”
Kathy Mellott covers the Cambria County Courthouse for The Tribune-Democrat. Follow her on Twitter at twitter.com/kathymellotttd.