Precinct 3 Montgomery County Commissioner Noack urges $7.1 million in budget reductions just through debt defeasance alone, intends to urge other reductions as well

Precinct 3 Montgomery County Commissioner James Noack, January 29, 2019.  

Conroe and The Woodlands, April 17 – Precinct 3 Montgomery County Commissioner James Noack has proposed $7.1 million in budget reductions for the Fiscal 2020 Budget for the Montgomery County government just through the early payoff of long-term debt. Noack told The Golden Hammer, “This proposal is just a first step. I realize that we need to achieve at least a one percent (1%) reduction in spending across all County Departments in order to give citizens the tax relief they deserve.”

While there have been a number of pressures to spur County government spending upward, especially the failure of almost every elected servant and County Department director to address massive bloating of the County government’s payroll, Noack and Montgomery County Judge Mark Keough have made clear that they are committee to achieving an actual spending reduction from the County government’s current $344,381,573 government expenditures budget. Noack, Republican of The Woodlands, issued a letter on Friday afternoon, April 12, 2019, which the Commissioner sent to all County government department heads and all elected servants (other than members of the Commissioners Court) calling “…to reduce the budget…” for the next Fiscal Year, 2020.

The Republican Party of Texas Platform calls for lower local government spending but also sets the growth of inflation and population as a “ceiling” on the growth of local government spending.

The County government spending growth numbers for Montgomery County are staggeringly shameful. Under Doyal, Riley, and Precinct 1 County Commissioner Mike Meador, government spending growth has been much faster for the Montgomery County government than even the federal government.

Shameful spending growth during past 14 years: 2005 to 2019

In 2005, the County government’s total expenditures were $119,777,565. Only fourteen years later, in Fiscal Year 2019, the County government’s spending as tripled to $344,381,573. During that same time period population in Montgomery County grew from 372,993 in 2005 to approximately 576,000 in 2019, according to the United States Census Bureau, an increase in population of 54.43%.

Between 2005 and 2019, there was inflation of 55.81%, according to the United States Bureau of Labor Statistics.

By those numbers the increase in the size of Montgomery County’s government should have grown no more than 110.24% between 2004 and 2019 to a ceiling spending amount of $251,820,353. Therefore, Doyal, Riley, and Meador pushed Montgomery County government spending – and taxation – $92,561,220 more than the level to which it should have grown, or $344,381,573.

The Citizens Budget Committee’s new Chairman, Jon Paul Bouche, called upon the Montgomery County Commissioners Court to reduce County government spending by one percent (1%) in the Fiscal Year 2020 Budget during the Tuesday, March 19, 2019, Commissioners Court meeting. Bouche, who is a Republican Precinct Chairman, member of the Montgomery County Republican Party Steering Committee, and Director of the Lone Star Groundwater Conservation District, asked Montgomery County Judge Mark Keough and the four Commissioners to reduce County government spending by $3,443,815 to $340,937,757 for FY 2020.

Bouche explained, “The members of our Commissioners Court often tell us how they are the experts in County government operations. The Citizens Budget Committee, therefore, takes them at their word. Since they’re the experts, we’re leaving the specific spending reductions to them to figure out and implement.”

Noack’s defeasance proposal

Precinct 3 Commissioner James Noack is proposing $7.1 million in budget reductions through early payoff of long-term debt. A few weeks ago, Montgomery County Auditor Rakesh Pandey submitted the 2018 Comprehensive Annual Financial Report (CAFR). Through discussions with Pandey, Noack confirmed that there are excess funds in the debt service fund balance and has proposed using that money for a significant cash defeasance.

“This money should go to work for Montgomery County taxpayers, not sit idle in an account,” Noack said. The Commissioner has asked the County’s financial adviser to give a presentation explaining the benefits of this proposal during the April 23, 2019, Commissioners Court meeting, when Noack will ask the court to approve the early debt payoff.

After reviewing several options to achieve the desired reduction in debt service requirements, Commissioner Noack is proposing the use of $6,970,602 in the debt service fund balance to purchase a portfolio of eligible securities, which will be deposited into an escrow account. The County would structure the portfolio to generate sufficient cash flow to pay off the Series 2014A bonds at maturity, including the entire 2020 maturity of $4,855,000 and a portion of the 2021 maturity of $1,800,000. This action would result in a $5,097,125 budget reduction for 2020 and a $1,845,000 budget reduction in 2021, in addition to a $167,125 reduction for 2019, thereby providing taxpayers savings of $138,648 in interest alone, assuming the County government then reduces the tax rate accordingly at the time of approving the budget in September.

Of course, if the County government merely takes the savings and uses them for other spending programs, there will be no tax savings whatsoever and will, instead, likely cost taxpayers additional funds through the professional fees involved in the foregoing transactions.

Two years ago, Noack previously led the County in early payoff of millions in debt, which would have saved taxpayers $7.4 million but instead resulted in higher government spending in other areas, which ultimately stayed within the government expenditure budget and continued to cost taxpayers more than they have suffered in taxes than previously.

Therefore, Keough’s and Noack’s efforts to achieve real reductions in non-debt government expenditures for the Fiscal Year 2020 Budget are absolutely critical.

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