In a state known for fiscal conservatism, one small New Hampshire county is facing a financial crisis.
Carroll County is looking to raise $2.6 million in additional taxes to help plug a $2 million deficit it faces after revenues were overestimated when it adopted a $29 million budget in March.
The county's legislative delegation, comprised of 15 state representatives tasked with setting the annual budget that county commissioners manage, is slated to hold a public hearing on Sept. 9 to present the $2.6 million supplemental budget plan.
A media report following a July 31 meeting that county officials said was "erroneous" mentioned the possibility of a bankruptcy filing as one possible solution to address the fiscal stress, which prompted the Bank of New Hampshire to freeze the country's $4.5 million tax anticipation note.
Carroll County Treasurer Chip Albee emphasized that bankruptcy is not an option because the state does not allow taxing authorities to file for Chapter 9.
Carroll County, with about 44,000 residents, is the state's third least-populous. It borders the northeast shore of Lake Winnipesaukee, New Hampshire's largest, and has several ski areas.
County delegation members hope tax increases that raise $2.6 million, in order to have enough cash flow for the remainder of 2015, will convince the Bank of New Hampshire to release the remainder of its TAN money.
Albee said he was able to get a partial release of the TAN on Aug. 19 after informing them of plans for a public hearing on the tax plan. A spokeswoman for the Bank of New Hampshire declined to comment on Carroll County's status, saying that the bank has a policy not to share any customer information.
"The $2.6 million is an estimate of what the county needs to satisfy its obligations for the remainder of the year," said Albee, who took over the local government's lead financial role following the resignation of former treasurer Jack Widmer in April. "The county has obligations and is going to meet those obligations."
Delegation Chair Karen Umberger attributes Carroll County's current struggles largely to county commissioners failing to conduct yearly audits from 2009 to 2012. A 2013 audit showed that around $900,000 was overspent.
"We did not have audits for many years so we didn't know where we stood," said Umberger. "I'm not sure the commissioners were watching the books as much as they could."
Moody's Investors Service withdrew its A1 rating on Carroll County in June 2012 due to "insufficient information." The ratings agency has downgraded Carroll's long-term rating from Aa3 in 2010.
Albee said the county has the lowest tax rate in the state and many of its financial problems can be solved by slightly raising taxes to generate additional revenue.
"The fact that we have to raise taxes now is the result of being taxed so low for so many years," said Albee, a Democrat who was assistant treasurer under Widmer.
In addition to budgetary challenges, there have also been personal disputes with delegation members approving a resolution on Aug. 17 stating they have no confidence in Carroll County commissioners.
County Commissioner Denny Miller resigned during a tense July 31 meeting with Carroll County delegation leaders because of ongoing conflicts with the representatives. Widmer resigned as treasurer after the delegation passed the 2015 budget, warning that the spending plan overstated revenues.
"There are 10 counties in New Hampshire and none of them have any issue with bonds and TAN notes other than Carroll," said Miller. "The problems go back years and years."
Miller is critical of the delegation for allowing years of missed audits and approving budgets that miscalculated revenue generated from the county-run Mountain View Nursing Home. He said the $2.6 million supplemental budget should get the county through the rest of the year, but that it will take up to two years to collect the money and may lead to the county having to borrow in the near future because of further budgetary challenges.
"Nobody watched the books for five years," said Miller. "This delegation is out to lunch. They don't know what fiduciary responsibility is."
Barbara Reid, a government finance advisor for the New Hampshire Municipal Association, said New Hampshire's has a strong record avoiding local fiscal distress thanks largely to the Revised Statutes Annotated Chapter 13 established in 1933, which provides state assistance to localities in need.
"There are a lot of safeguards in place to prevent a municipality from even considering a bankruptcy," said Reid, who was an assistant commissioner with the New Hampshire Department of Revenue Administration from 1986 to 2005. "We have a lot of controls in the state."
Reid added that many New Hampshire municipalities are proactive when it comes to staying on financial track with around 85 to 90% of cities and towns conducting audited financial statements even though they are not required. She said Carroll County's situation could serve as a lesson for other municipalities to make sure they are up to date on audits.
The New Hampshire Department of Revenue Administration assists municipalities with their administration of taxes to make sure they are set at appropriate rates to generate necessary revenue. Reid also said there are state statutes that govern a local government's investments to make sure they are not too risky.
James Spiotto, managing director at Chicago-based Chapman Strategic Advisors LLC, said only one of the 320 municipal bankruptcies across the country since 1954 was in New Hampshire.
The one exception was the Sullivan County Regional Refuse Disposal District in 1993, a year before state law changed to not authorize bankruptcies.
Spiotto said New Hampshire's Chapter 13 program has been a major reason for New Hampshire's success and that the state assistance option may be something Carroll County will want to consider depending how finances line up next year.
"The Chapter 13 program has been very helpful," said Spiotto. "It's a means of arranging bridge financing and hopefully getting to the other side."