A misallocation of tax dollars through the Ottawa County Treasurer's office has brought the county budget process to a halt and forced the county's governmental building authority and rural firefighters to brace for a blow to their budgets.

According to Bill Turner, a certified public accountant who is the budget maker for Ottawa County, county treasurer Brenda Conner has not appropriately applied tax allocations to county accounts dependent upon sales tax revenue - the Ottawa County Jail, the county road tax account, the rural fire fighters' tax revenue account and the account which holds the money to complete construction of the Ottawa County Courthouse and annex building.

Early estimates indicate that the sheriff's office and the county road tax accounts were each shorted more than $136,000 in 2007-08. But, the problem reaches back several years, according to county officials, and stretches across a series of voter-approved sales tax measures.

As of Tuesday, county officials were uncertain how long the road tax and jail tax revenues have been affected. 

Officials are certain that the current formula, which is not accurate, has been used since at least 2004 when the county added the tenth of a cent countywide sales tax, but county officials are asking Turner to look into just how far back the allocations have been in error.

The challenge for the county now is to find a legal way to get tax-payer dollars misallocated in previous fiscal years back into the appropriate county coffers for which they were intended.

“This could mean a double whammy for the governmental building authority and the rural firefighters,” First Assistant District Attorney Ben Loring said. “Not only will they have a reduced allocation, they could have to give money back.”

County officials said Conner has been applying a full 10 percent of tax revenues to the firefighters' account, 25 percent of tax revenue to the building authority account and splitting the remaining 65 percent between the sheriff's department and the road tax accounts. The allocation was based off of tenth of cent, quarter-cent and half-cent sales tax implementations.

The proper allocation would have been less than that in terms of percentages, Turner said, recognizing that the taxing percentages should have been calculated against the county's 1.35 cent overall sales tax figure.

The longtime accounting professional said the allocation to the firefighters' account should have been closer to seven percent while the building authority should have received about 19 percent of overall revenue. Implementing the correct formula would appropriately disbursed the revenue and left the two remaining accounts with their proper share.

Conner explained to members of the Ottawa County Excise Board that her formula for disbursing the county's  sales tax revenues was given to her by the two auditors within the state auditor's office.

“I called them to stress the formula because I did not want this happening,” Conner said. “And, it has happened.”

Conner offered her explanation as county department heads gathered to make their final pitch to the excise board as it prepared to set the budget and start the new fiscal year.

Rob Kimbrough, chairman of the county excise board, and fellow board members heard the budget requests of all the county officials and worked through a projected budget that is healthy - leaving the county with a $900,000 surplus.

However, the board moved to not set the budget until tax allocations have been reviewed and the board is certain of the full impact of the error.

“I would like to see on paper what happened and what should have happened and who owes who what,” Kimbrough said. “Maybe we work out a plan for getting those funds back where they are supposed to be and figure out how long it will take.”

Tuesday marked the first time in at least seven years that the county has not had its budget approved on July 1, according to Ottawa County Clerk Reba Sill.

Who found

the problem?

An inquiry by Ottawa County Sheriff Terry Durborow brought the matter to light on Tuesday, shortly after he reviewed his projected budget for the 2008-09 fiscal year.

“It didn't make sense,” Durborow said. “Tax revenue is going up, but my portion is not.”

 Durborow said his budget has been tightening over the past couple of fiscal years and he had complained of the dwindling budget more than once.

The sheriff said he has been watching tax revenue numbers climb and expected the next fiscal budget to reflect the growth - but, it did not.

Durborow said he was upset when his new budget showed a decline and fell below the $978,000 budget he struggled to meat last year.

“It kept me up at night,” Durborow said. 

He went to Turner and asked for an explanation. His demands prompted the accountant to inquire about the treasurer's formula.

As a result of Turner's finding, the excise board adjusted the sheriff's budget - giving the department more than $1 million to work with.

“I can live with that,” Durborow said. “I can take care of things that I need to take care of like fixing the roof and replacing patrol cars.”

Kimbrough offered his appreciation to Durborow for his understanding and commended him for making the short budget work.

Who will suffer?

€ Rural firefighters

Ottawa County's rural fire departments that have entered into lease purchase agreements for equipment could be in danger of not being able to meet their financial obligations, county officials said.

Seven of nine departments carry a lease purchase agreement and two of the seven have more than one lease arrangement, according to Brenda Ellis, first deputy to the Ottawa County Clerk.

Ellis said that most of the rural departments have little or no budget and depend on tax revenue to cover their lease payments.

The tenth of a cent tax passed by voters in 2004 was designed to provide the firefighters with means for obtaining equipment and fire vehicles and reduce the departments' dependency on fund-raising.

€ Courthouse

construction

The county's governmental building authority has structured repayment of bonds based on projected earnings from tax revenue. 

Repayments are expected to cost the county an estimated $35,000 a month.

Turner said Tuesday that a correction in the tax allocation and an attempt to repay what was overpaid to the governmental building authority could cost the authority another $30,000.  If that estimate holds true, the county's ability to make its loan payment is in jeopardy.

The county still has two phases to let out for bid to complete the courthouse - demolition of the old courthouse and construction of the parking lot and sidewalks.