Budget committee changes course on tax shift
In a reversal of its previous decision, the Loudon County Budget Committee on Tuesday recommended that the Loudon County Commission keep 8 cents in property tax money in the education debt fund for the $43 million school building project and not transfer the money to the general fund.
Committee member Sharon Yarbrough recommended the county decrease the general fund by $300,000, which was earmarked for an expansion effort at the county office building to address crowding and storage concerns, and move 1 cent in property tax money and an additional $1 million from the capital projects budget to the general fund.
Committee members said those changes would appease concerns that the general fund was getting too low, while leaving the previously allocated money in the education fund.
Don Miller, a member of the committee, said the county still faced the problem of too much money in the education fund, which could threaten the county's tax free status with the IRS.
Miller said the county could either pay down some of the education debt early or pass along the 8-cents to the taxpayers.
"Or, leave it alone and proceed with phase I, like we told them we were going to do," Yarbrough said.
"You can't do that," Miller said. "You're going to have an IRS problem."
Budget Director Tracy Blair learned in mid-April from Mary-Margaret Collier, with the state comptroller office, that a ballooning debt fund could raise flags with the tax agency.
"I have yet to see the IRS come down on us," Yarbrough said. "It is a recommendation. We should be all observant of that, I don't disagree with that. We should be attendant to our county procedures, but they have yet to tell us that we are in violation."
Miller said the county didn't find out about the IRS's regulations until Blair's conversation with Collier.
"I would like to think that we knew that we had to maintain our balances and look at our debt long before April 12th," Yarbrough said. "She may have mentioned the IRS specifically, but we knew we had to manage our money this way. It wasn't a secret."
Miller responded: "We knew what the fund balances were going to look like more or less for quite some time. What we didn't know is that there was a problem with the IRS if you let these balances get too high."
Miller said he was in favor of keeping the 8 cents in the education fund as long as he received further information from either county attorney Bob Bowman, or Collier about the IRS regulations before the final vote on the budget.
"If they don't ever know about it, (and) we just ignore the regulation, I don't operate that way," Miller said. "Maybe other people want to. I don't know. There's a good chance they may never find out."
Blair said the IRS could find out about any escalating funds when the county's annual financial report is released.
Committee member Bob Franke made a motion to keep the 8 cents in the education debt fund, and the panel approved it by a 4-0 vote. Member Austin Shaver was not present.
"So we do nothing?" Yarbrough said.
"Exactly," Franke said.
Mayor Estelle Herron said she was concerned that the county would run into similar problems when they begin considering further school building projects.
"Are we going to go through this same escapade when we start going through phase II that we went through with phase I with this mess," Herron said. "This is absolutely chaos from the word go."
She said that the tax rate was raised to 20 cents and not some other amount because the county only received estimates and not concrete construction costs.
"What caused this to be 20 was that we had no set amount of money that this was going to cost us," she said.
In other business, the committee:
● Recommended that the commission cut commissioner salaries in half from about $80,000 to $40,000.
● Recommended that a $4,000 allocation that was previously cut from the Loudon County Dive Rescue Team be reinstated.