Don's Just Wrong

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 response.

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 than Don.

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 Connection.

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,, 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 reserves be?

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 for mayor.

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 back.

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.

Van Shaver
Loudon County Board Of Education

Funding The School Building Program -- Opinion Poll
(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 these topics.

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
tax increase.
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 Tax Increase?
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.