Advisers recommend 35% combined reserve target, debt limits in Nelson County financial policy draft

Financial advisers from Davenport & Company urged the Nelson County Board of Supervisors on Sept. 19 to adopt written financial policy guidelines that set clear reserve and debt benchmarks intended to preserve fiscal stability and guide future Boards.

Roland Kooch and Ben Wilson told the Board their draft policies would memorialize practices the County already follows and provide benchmarks for creditworthiness and long‑term planning. They recommended reframing the County’s fund balance target as a percentage of the General Fund budget: a minimum Unassigned Fund Balance of 30% (about $13.8 million on the county’s FY2025 figures), plus a 5% Budget Stabilization Fund (about $2.3 million), producing a combined recommended reserve target of 35% (about $16.1 million). Davenport also proposed a three‑year replenishment plan if reserves were drawn down and said the Budget Stabilization Fund should be used before tapping Unassigned Fund Balance.

Davenport reviewed Nelson’s fund balance history and projections: roughly $28 million of unassigned fund balance in 2019, with an estimated $19.4 million in FY2025 absent outperformance, and noted COVID‑era receipts had affected recent totals. The advisers said those levels would generally place Nelson in a strong credit position and estimated that, if Nelson sought a rating, the County could be in the "Aa" range based on reserves and metrics.

On debt, Davenport recommended policy ranges including tax‑supported debt not to exceed 3.5% of assessed value, debt service at 10–12% of operating expenditures, and tax‑supported debt service plus fixed costs not to exceed 17%. As of June 30, 2024 the County had about $8.3 million in outstanding debt; the advisers showed that previously discussed projects (approximately $35.1 million) would still leave the County well below the 3.5% assessed‑value threshold in Davenport’s theoretical capacity model, though they stressed capacity does not equal affordability and emphasized budgetary analysis before issuing debt.

The advisers also recommended formalizing revenue and expenditure policies (for example limiting one‑time revenues to one‑time expenditures), developing a five‑year Capital Improvement Plan, coordinating with the Treasurer on investment management policies, and considering an Investment Management Committee that would include Board members, the Treasurer and the County Administrator. Davenport outlined next steps: revise the draft, present again for public Q&A, and bring an updated document for Board consideration of adoption.

"These policies are meant to be a living framework the County reviews annually during the budget process," Kooch told the Board.