|7th District Commissioner, Don Miller, is afforded
the opportunity by the News Herald to submit a monthly column in The
Village Connection, a news publication with circulation primarily in
Tellico Village. Apparently Mr. Miller had received a number of
communications from his constituents pertaining to recent stories I
published on my web site about various aspects of the proposed school
building plan. Primarily the funding of the plan. So Mr. Miller devoted
his March column to dispute the facts of my stories.
I asked News Herald publisher, Kevin Burcham, for equal
time/space to reply to Miller's column. He agreed but in the end wanted
to edit my response so excessively as to alter the effect of my
Don’s original letter was
1,202 words. My reply was approximately 750. Their revision of my
reply is 525 words. I submitted a reply that was 450 words/37%
shorter than Don’s. They cut my submission by another 225 words/30%,
meaning I was given 677 fewer words/56% less space to make my point
Below first is my response to Miller's column followed
by Miller's original column in the The Village Connection. You can read
them in either order you choose.
To The Village Connection
This information is being provided in response to an article written by
Commissioner Don Miller that appeared in a recent edition of the Village
First, let me first say I consider Don Miller a friend.
I served with Don on County Commission for four years in which time we
agreed on many issues. However, on the matter of the building program
funding, Don's just wrong.
Don’s recent article seemed to take issue with a story I
wrote for my web site, www.vanshaver.com, reporting total county
reserves at more than $23,000,000.00 at the end of the last fiscal year.
That was information directly from the State Comptroller’s annual
county audit. I simply reported the finding. Commissioners should be
commended for having healthy reserves, but just how high should those
Don points out early in his column that I am running for
County Mayor as though that may in some way alter the facts or impact my
motives. Yes, I am running for County Mayor, but he failed to mention
that I am also a member of the Loudon County Board Of Education. As
such, I and other members of the board have spent many, many hours with
professionals studying, working and developing a prioritized school
building plan that a majority of the board feel would meet our most
pressing needs. I was a board member long before I became a candidate
Five times in Don’s article he refers to the building
plan as $41-47M. This is incorrect. Therefore, the premise of much of
his article is also incorrect. The current building plan would require
the county to borrow approximately $37,000,000.00. This would include a
new PreK-12 in Greenback and a new middle school in Loudon. The
cafeteria expansion/renovation for Philadelphia would be paid for with
reserves from the Rural Debt/building fund.
Don’s article suggests two options: a property tax
increase now or a property tax increase later. Option 1 is to raid the
school building fund now to fund ongoing operating costs for the county
and the school system, build only one of the new schools, and raise
taxes next year (after the election) to build the other school. Option
2 is to build both new schools now and raise taxes now.
Currently, there are sufficient revenues going to the
school building fund to fund the $37,000,000.00, depending on the
interest rate at the time a loan or bond issue is secured. Each quarter
percent increase in the interest rate reduces the amount we can borrow
by approximately a million dollars. Hence, the urgency to secure the
funds while interest rates are at historic lows. We can borrow $41
million for 30 years @ 3%, $38.5 million for 30 years @ 3.5%, $36.4
million for 30 years @ 4% or $32.4 million for 30 years @ 5%.
One of the primary differences between Don’s proposals
and the proposal put forth by Commissioner Austin Shaver
to fund the building program is the
term of the loan. Don has argued that a 30 year loan would cost too
much in interest over the life of the loan, but just because the loan is
for 30 years does not prevent earlier payoff. Certainly, a 20 year loan
would cost less but so too would a 10 year loan. For that matter, not
borrowing at all would be the least expensive way out, but whether it is
your home loan or a school loan, you borrow what you can afford to pay
In summary, depending on the interest rate, both new
schools can be built now with no tax increase even if minor reductions
to the building plan have to be made. If neither county commission nor
the school board can curb their growing expenditures then a tax increase
in the future could become necessary. However, with such hefty
reserves, a tax increase could be delayed until a time in which the
economy has improved and reduce or eliminated the need for a tax
increase at all.
The current building plan was submitted to the commission
nearly fourteen months ago and has yet to receive full funding. In the
meantime, construction and material costs have started to rise and
interest rates could go up at any time. The current projected cost for
the building program has and will increase the longer we wait. Interest
rates have and will increase the longer we wait.
The proposed building plan can be delayed no longer. It
has already been put off far too long. Both the Loudon schools and the
Greenback school are massively overcrowded with Greenback facing almost
daily life safety issues. The county is being forced to spend hundreds
of thousands of dollars to maintain the aged facility in Greenback and
to accommodate the overcrowding issues at all three schools.
I guess Don and I just philosophically disagree on how to
fund the building program, but philosophy doesn't alter fact.
Loudon County Board Of Education
Funding The School Building Program --
(by Don Miller - County Commissioner, District 7)
The Village Connection
This month, I would like to discuss the relationship between county
reserves and funding of the school building program and how much money
the County can borrow for the building program without a property tax
increase. I am also conducting an opinion poll to hear your views on
Building Program and County Reserves
I've received a number of e mails regarding statements made on Van
Shaver's blog site with respect to the School Building Program. Van is
running for County Mayor. He states on his blog site that the county has
$23M in reserves and claims that we can fund the entire $41-47M School
Building Program without a property tax increase. I, along with many of
my fellow Commissioners and the County Finance Director and Mayor,
disagree with this. First of all, I should say that I support all 4
building projects and believe we will eventually have to do them all.
However, I also believe we can't do them all at once without a
It is true that the County does have good reserve balances and is
financially strong. We also have about $25M in outstanding debt and are
looking at another $41-47M in debt for the school building program.
Because we are financially strong, we can double our outstanding debt
and borrow about another $25M without a property tax increase. This is a
real accomplishment. However, to fund the entire school building
program of $41-47M, we will definitely need a tax increase (in spite of
what Van says ). Van is only telling part of the story.
One of the reasons we have good reserve balances, is that several years
ago we began setting money aside for an anticipated school
building program. This will permit us to borrow another $25M for the
schools without a property tax increase. Not many counties could do
this. We also need to maintain minimum balances in our funds as
recommended by state officials. In other words, we can't draw our
reserves down to zero. We are also drawing down the reserve balances to
pay for ongoing operating expenses and outstanding debt. In my opinion,
to borrow the entire $47M claiming we can do it without a tax increase
would be fiscally irresponsible. We could get away with this for a year
or so but then we'd be facing a tax increase. To say otherwise is not
telling the whole story to the taxpayers of Loudon County.
Now For a Few More Details
The County has a number of funds, each of which is dedicated to specific
activities. The fund that is available to pay for school debt
is called the Rural Debt Fund (Fund 156). Several years ago, we began to
allocate 8-12 ˘ (or $1.2-$1.8M per year) of property tax revenue to this
fund. This was done in anticipation of a major school building program.
This past year, on a one time basis, we increased the tax pennies going
to Fund 156 from 12˘ to 21.2˘ (or $3.1M per year). This was done by
taking property tax dollars away from both the School Operating Expense
Fund and the County General Fund. The General Fund covers essentially
all county expenses with the exception of schools and roads.
However, borrowing more money is a long term commitment - so we need to
look at our financial situation beyond the next year or two. Increasing
tax dollars going to Fund 156 was a good move for the short term, but is
not sustainable over the long term for several reasons.
First, it is not realistic to assume that we can continue to allocate
the same tax dollars year after year to the School Operating Expense
Fund (as we did this year). Tax dollars going to the School Operating
Expense Fund will need to increase because of teachers salaries (which
did not increase this year), operating expenses for new schools, and
other expenses which will undoubtedly increase. Also state and federal
revenues and grants to schools will be cut. One time federal stimulus
money will also disappear. The federal and state governments are also
facing huge deficits and will have to make additional budget cuts, some
of which will trickle down to the local governments. Property tax
pennies allocated to the school operating expense fund have increased by
20˘ (about $2.4M per year) over the last 5 years. While this can't go on
forever, this is further evidence there will likely be some increases
needed in future years for the reasons given above
Secondly, the General Fund is currently being underfunded by about 5˘.
(about $860k/yr.). After several years, we will need to increase tax
dollars going to this fund to stay above the state recommended minimum
fund balance. Also, additional tax dollars will be needed for items not
in this year's budget such as salary increases and new vehicles.
How Much Money Can We Borrow Without A
21.2˘ of our property taxes are currently going to Fund 156 (Rural Debt
Fund). However, 6.7˘ are needed to pay off the existing $12.5M school
debt over the next 15 years. This leaves 14.5˘ available for new debt.
14.5˘ could fund a 25 year loan of $31M if nothing else changed
However, we can not sustain 14.5˘ over the long haul without a tax
increase for the reasons previously discussed. As I indicated, we need
to allow something for future increases in tax dollars going to the
School Operating and General Funds. I believe we will need to put at
least 5˘ back into these two funds. This year we increased the Highway
Fund by 1.75˘. In future years, we could return to previous levels of
highway funding and put this money into Fund 156. After making these
three adjustments, the pennies available for new debt would be 11.3˘.
11.3˘ will fund a 25 year loan of about $ 25M . So I conclude we can
probably afford to borrow another $25M without a property tax increase.
Where Do We Go From Here?
My own thinking, at this point in time, is to fund the $25M this year
and deal with the balance next year when hopefully the economy and
unemployment will be better. Many citizens are really hurting
financially this year. By doing this, we avoid a tax increase this year
and hopefully might have a smaller one next year. If we were to do this,
the School Board would have to set priorities and decide which
schools to build first (Greenback or Loudon). Of course, they would
rather not do this and would like to build it all at once.
Another option is to fund it all this year and raise property taxes now
by 10-15˘ to cover the cost of borrowing the entire $41-47M. As an
example, this would represent a property tax increase of $100-150 for a
$400,000 home. I'm open to considering this option depending on the
views of my constituents.
In the meantime, the projects are not being delayed. We've appropriated
$1.5M so that all the projects can proceed to the point of
being ready to go out for bids in June. At that time, the Commission
will have to decide how much to fund this year.