Q: and A:

Dallas County Treasurer Bill Melton is the kind of guy who turns off the light when leaving a room to cut the country's electric bill.

After 16 years as treasurer of one of the nation's largest counties, Melton has gained a reputation for penny-pinching and financial planning that observers say is one reason the country has maintained its double triple-A ratings for 15 consecutive years. "Professional management is the key," said Melton.

Finance experts agree. They say that Melton is known for his focus on planning everything from bond sales to helping draft a zero-based budget inn the wake of declining property values that have only now begun to show signs of a rebound.

"Bill is a man of details," said a Dallas bond dealer who has worked with Melton. "He understands numbers and knows how to translate that into services. Efficiency is a word you hear him use a lot."

Melton would not dispute that. In fact, in his book if there is a way to save taxpayers money, there is no such thing as a small savings. A case in point in his effort to get the U.S. Postal Service to let counties mail tax, voter registration, and jury notices at no charge. The potential savings to Dallas County in one year would be $2.5 million.

So far, the proposal has not been adopted, but Melton remains active in the push on issues that affect the bottom line of counties. His advice to county officials: Remain flexible in trying to find better, cheaper ways to run government. His efforts have been recognized, and his office has been called one of the best in the nation by his peers.

The office of Dallas County treasurer has changed radically since 1977 when Melton succeeded Warren Harding, who became state treasurer. Government's responsibilities are still the same, Melton said, but not its economics. For instance, the county collected less than $500 million in revenues during his first year, last year revenues topped $25 billion.

During a recent interview with Southwest bureau chief John Racine, Melton talked at length about how Dallas County has become more business-like in the way it operates, how it managed through the oil bust, and about the challenges facing large counties.

Q: Last fall, the city of Dallas and the Dallas Independent School District lost their triple-A ratings, from Moody's Investors Service. Many people speculated the county was next, but that never happened. Why is that?

A: We meet with the rating agencies twice a year and they want to find out what the ultimate long-term plan for Dallas County is and we always plan for everything. Even our debt is planned to the hilt.

Q: Even though your tax base has slipped since the 1986 downturn began, the county was able to manage without major property tax increases until last year. Do you see a repeat of that in the next fiscal year?

A: The commissioners court had to raise the property tax from about 14 cents [per $ 1 00 of assessed valuation] to about 20 cents. That was a healthy jump. But the budget director has said there is no anticipated tax increase for fiscal 1994 at all.

Q: There were a number of curtailments such as no salary increases for county workers and reductions in equipment purchases to make that budget work. How, has the county been able to manage with a series of small efforts?

A: Professional management is the key. We have a team approach and we have a commissioner's court that is focused on doing things and on monitoring the finances as they change.

Q: Like most treasurers, you invest county funds, but that job has not been easy recently, because of the drop in short-term interest rates. What has that meant for your interest earnings?

A: Three years ago I was looking at earning $31.7 million a year in interest], but this year I have projected $8 million. You have got interest rates going from around 3.05% to, say, 2.59% and that has us looking for every possible means to earn money.

Q. As someone who invests up to $80 million a day, do you think that counties need more freedom to invest money?

A: Not really. After 16 years, there has got to be something out there to help us manage better. I have been going to investment school on the weekends to keep up. and if I can find software somewhere that will improve our [return on] investments, then I am going to use it.

Q: But you have also been instrumental in broadening the investment powers of Texas counties. Tell us about the most recent session.

A: We asked the Legislature to gives us authorization to put collateralized mortgage obligations into our investments and they did. There is a risk there and we understand that. We may never use them, but at least it is part of our strategy now.

Q. Let's change subjects a little. Like everyone else, you have to yield restrict the in vestment of your bond proceeds under the arbitrage rebate regulations. what has been your experience?

A: This year we have to write a check for $3 million to the Internal Revenue Service. We've always done everything by the book. We've got good counsel. We've got honest people who are doing a good job, but because of a fluctuation in the marketplace, we suddenly have to pay the federal government.

Q: Did you have to rebate any arbitrage last year?

A: I had to pay about $600 last year, but I don't consider that anything compared to $3 million.

Q: What does that tell you about the arbitrage rules?

A: The rules are constantly changing and we need to do something about it. I wrote a letter to [House Ways and Means Committee Chairman Dan] Rostenkowski and I said let's win-win on this deal, let's be innovative. We said. look, we'll give you the money, but give it back to us under guidelines that you work out with us mutually to help us fix streets, build highways and bridges. It never even got a response.

Q: Are you hearing complaints from other counties?

A: Absolutely. We have 254 counties in Texas with populations up to four million, and it's hurt everywhere that so has to spend their [bond proceeds] in a certain time frame.

Q: Another problem you share almost exclusively with urban counties is crowded jails caused by a backlog of felons who cannot go into the crowded state prison system. What has that meant for Dallas County?

A: The cost of overcrowding in the jail is eating us alive. We average about 2,000 prisoners a day who are supposed to be in the state prison system, but there is just no place to put them.

Q: How, much is that problem costing the county by shifting the cost of their incarceration from the state to the counties?

A: A few years ago we looked around and found the average cost was $50 per day per inmate. In 1991, the Legislature passed a bill to pay us $2.0 per day.

Q: The county's burden would appear to amount to about $60,000 a day, or about $22 million a year, is that correct?

A: Well the number is not exact, but that's about the only way you can look at it.

Q: But is jail crowding a long-term problem for the counties?

A: That's hard to say. The state is planning to build more facilities quickly so they can take those prisoners down into their system more quickly. There are some people who think the number of prisoners will continue to grow so the problem won't go away.

Q: One experience you have had that may be relevant to other parts of the nation is the way in which Dallas County survived the economic downturn. How was the county's approach to finance affected by the drop in property values?

A: I would hope we are at the bottom of that cycle. I think that the caution we have used is starting to give way to realism.

Q. Did the downturn force you to become more efficient or did it only accelerate what you were already doing?

A: I think we were already taking those kinds of steps. I'm always oil the outlook for new procedures and ideas. My policy book is loose-leaf and I tell people to not ever say that we've always done it this way. That's my philosophy, and the [downturn] only reinforced that.

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