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By Jennifer Learn-Andes

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Luzerne County Manager Robert Lawton discusses a 2014 draft audit and his plans to get the county back in the black during a media briefing Tuesday in his office at the county courthouse.

Luzerne County government dug itself deeper into a hole in 2014, spending $3.6 million more than it brought in, a new draft audit shows.

To climb out, the county will need $16.2 million because the new expense overruns and revenue losses were added to a carryover fund balance deficit of $12.54 million.

Though the news was dismal, county Manager Robert Lawton said he has a concrete plan to fill the hole and put the county back in the black by the end of 2017, maybe sooner.

Several major factors contributed to the 2014 deficit, Lawton said in a briefing to council:

• $1.17 million in big-ticket tax assessment appeal refunds that must be logged as a debt in the 2014 ledger because they weren’t paid until 2015.

• $2 million in revenue cuts for domestic relations.

• $1.03 million in unbudgeted debt repayments due to an inherited borrowing package that had spiraling fees.

• $2.01 million less in property tax payments than anticipated.

Lawton’s critics already are questioning why he didn’t foresee these problems and adjust accordingly.

In August 2014, he had projected the county could end 2014 within budget or possibly with a surplus.

Lawton said he had hoped to find enough savings to cover the unbudgeted expenses and revenue losses but was unsuccessful.

The assessment appeal refunds were not anticipated, he said. The county had no money budgeted for refunds in 2014, but the administration had expected money could be pulled from other areas because the county spent $182,544 in refunds in 2013. The county paid refunds through April 2014, but more started piling up as several larger commercial and industrial entities unexpectedly negotiated reductions that applied retroactively several years to the date they had first contested their values.

Lawton also told council Tuesday the impact of the $2 million reduction in domestic relations funding, which was due to “ambiguity regarding the availability of state funding,” was addressed in the 2015 budget so it won’t create a problem again.

The rising debt repayments in 2014 are no longer an issue because the package was refinanced at a lower, fixed interest rates, he said.

He plans to pump at least $7 million toward the shortfall in 2015 from the following:

• $3 million in bond savings from this year’s debt refinancing.

• $2 million from the sale of the former Valley Crest Nursing Home property in Plains Township to a private developer, which is on track to close by the end of the year.

• $2 million in surplus funds from a Tax Incremental Financing plan, or TIF, that diverted tax revenue from new development along Highland Park Boulevard and at the Arena Hub Plaza to fund improvements to Mundy Street, Highland Park Boulevard and Coal Street.

• $600,000 in savings from a new medical services contract at the county prison.

Under his plan, another $4.7 million would be added to the reserve in both 2016 and 2017 from the halted county homestead tax break on primary residences.

The resulting $16.4 million infusion would wipe out the negative balance by the end of 2017, he said.

“We have arrested the decline, and we’re heading for solvency,” Lawton said.

Additional gains may come from refinancing more debt at a lower interest rate, unlocking a $6 million reserve from past borrowing at $1.5 million over four years and efficiencies recommended by an outside consultant that is wrapping up a five-year financial plan, he said.

The numbers presented in the audit are subject to change because the county’s outside auditor — Baker Tilly Virchow Krause LLP — needs more time to complete the final audit, which was due June 30 under the county’s home rule charter.

Lawton had said he would resign if the draft audit was not completed by June 30. He emailed a copy of the draft to council Tuesday afternoon but said Baker Tilly asked the county not to release the 70-page document because it is still undergoing review.

Council Chairwoman Linda McClosky Houck said Baker Tilly representatives are scheduled to discuss their findings at the July 14 council meeting.

“I’m sure we will all have a lot of questions. We look forward to having a discussion with the auditors as well as management,” McClosky Houck said.

McClosky Houck said she had hoped for “better news” for 2014 but is encouraged by Lawton’s plan to get the county out of debt and start building a reserve. The timely release of the draft audit also makes the findings more helpful, she said.

“I think that it’s a real plus getting the audit this early in 2015 because at least it gives the administration a chance to make adjustments for the remainder of 2015 based on the audit findings,” she said.

Councilman Stephen A. Urban, a former commissioner, said he believes Lawton should “bow out gracefully” because the deficit has continued to grow under his administration. Urban said revenue from Valley Crest and other one-time revenue streams should be used to build a reserve, not close the gap.

“He should find other ways to come in under budget to make up for the shortfall,” Urban said, referring to Lawton. “The blame game. That’s all he plays. He just can’t manage. That’s the bottom line. He’s just not fit for the job.”

Councilwoman Kathy Dobash, another frequent Lawton critic, sent Lawton an email Tuesday asking him to resign.

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