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Luzerne County Council heard two unpleasant updates Tuesday: the deficit grew to an estimated $10.1 million at the end of 2013 and repayments have skyrocketed on an inherited 2006 debt refinancing package.

The deficit increased because spending exceeded revenue by $6.4 million last year, said Andrea L. Caladie, a CPA with Baker Tilly Virchow Krause, LLP, during a draft audit summary presentation.

The fund balance is now a negative $10.1 million because the county carried over a $3.7 million deficit from 2012, she said.

The audit was due June 30 under the county’s home rule charter. County Budget/Finance Division Head Brian Swetz has blamed staffing shortages on delays compiling information the outside auditors needed to complete their work.

County Manager Robert Lawton told council he will submit his resignation if the 2014 audit is late in 2015. He also said he would resign if he misses the Oct. 15 deadline to submit the 2016 budget or if budgeted spending exceeds revenue again.

Caladie partially blamed the 2013 deficit on the administration’s decision to not proceed with a budgeted cash advance on back taxes, a process known as monetization, which would have generated $4.3 million.

Lawton said he tried to obtain non-recurring revenue from other sources so the county wouldn’t be forced to tap the cash advance because monetization comes with fees and could hurt the county’s efforts to obtain an uninsured credit rating needed to refinance debt at lower interest rates.

While use of such one-time fixes doesn’t look good to rating agencies, the county’s continued deficits also harm the county’s fiscal status, officials say.

Caladie also cited several expenses that exceeded 2013 budget allocations by the following amounts:

• Health insurance, $506,000

• Prison inmate health care, $372,000

• Debt service fees, $1.8 million

• Children and Youth, $488,174

The county’s practice of paying the multimillion dollar employee pension fund subsidy a year late and a $1.02 million revenue shortfall for 911 also contributed to the deficit, Caladie said.

The information about the 2006 debt refinancing package came from Scott Shearer, of Harrisburg-based Public Financial Management, or PFM, which has provided financial recovery and debt management assistance to the county for several years.

Prior commissioners Greg Skrepenak and Todd Vonderheid had approved the restructuring package — known as a “swap” — to obtain $12 million in cash to shore up the general fund budget in 2006 and 2007. Councilman Stephen A. Urban, a commissioner at that time, opposed the restructuring, comparing it to refinancing car payments to buy groceries.

The commissioners publicly stated at the time the restructuring would increase the county’s overall future debt repayments by about $2 million.

However, Shearer said the package also switched some fixed interest rates to variable ones, causing the county’s interest repayment to escalate from around $250,000 annually to more than $2 million this year.

“It’s a huge difference,” Shearer said, warning council the interest payment is expected to increase higher next year.

The increase largely stems from heightened focus on the fiscal health of government borrowers, and Shearer said financial institutions get “very uneasy” when they see multiple years of deficit spending and other symptoms of distress exhibited by the county.

Shearer said he will present detailed and complicated options to council next month that may lock in manageable fixed interest rates on the outstanding $88 million involved in the 2006 restructuring. The county will pay a penalty to extract itself from the variable rates but may save money and stabilize payments down the road, he said.

The county’s success obtaining a better deal will hinge heavily on council’s adoption of a “very sound” 2015 budget without one-time fixes that will create a reserve and cover all expenses on time, including pension fund contributions, Shearer said.

Council has until Dec. 15 to find $4.5 million to avoid a proposed 4-percent tax hike. A council majority appears to oppose a tax hike.

The county owes $362 million in principal and interest through 2027 on 19 bonds, with payments projected at $28.5 million next year, Shearer told council.

Reach Jennifer Learn-Andes at 570-991-6388 or on Twitter@TLJenLearnAndes.