Finance Meeting Flop

Wednesday's big finance meeting put on by county mayor, Doyle Arp, was a big flop. To make a long story short, by the end of the meeting commissioners and school board members were no closer to getting the answers to financing the building program than they were before the meeting.

Arp brought in Ron Woody from CTAS to give a lot of details that had no bearing on the building plan at all. Mr. Woody spent most of his time discussing issues totally unrelated to financing the building program.

Everybody knew going into the meeting that Woody could actually come in and give the true facts or he could come in and carry the water for Arp and those who have fought the building program from the get go. Unfortunately, Mr. Woody choose the latter by using inflated numbers, high interest rate predictions and even refusing to use numbers requested by school board members. 

The only high point came when Woody vigorously warned against taking the building projects to bid with no funding available. A process that several commissioners had almost demanded.

Just a little history. Five years ago Mr. Woody was brought in to analyze the county's financial situation. Woody reported that the county was broke and would end that fiscal year in the red. He advised commission to raise taxes. Myself and a few others disputed Mr. Woody's assessment knowing the county was still financially sound. Unfortunately the majority of commission fell for his projections and passed the largest tax increase in the county's history. Shortly there after we found that Mr. Woody's projections were way wrong by about two million dollars. But it was too late. The tax increase had already been passed.

All smoke and mirrors aside, the building program still comes down to two questions, how many years to finance and what interest rate will we have to pay. Those questions are still unanswered and till this commission decides to get serious and take the vote to build, we will never know the answer and that's unfortunate for everybody.  

Loudon could borrow $30M without tax hike

County sought advice on school program funding

Hugh G. Willett
LOUDON - Loudon County has the fiscal ability to borrow about $30 million to build new schools without a property tax increase, according to a municipal finance expert from the University of Tennessee.

Members of the Loudon County Commission and the school board met in a special-called meeting Wednesday to hear a presentation on how much the county can afford to borrow to fund a school building program estimated at up to $47 million.

Ron Woody, a staffer at the University of Tennessee's Community Technical Assistance Services, answered questions from commissioners and school board members and presented several funding scenarios based on different amounts and different loan terms.

Competing strategies for financing the program range from as low as $25 million over 20 years to as high as $47 million over 30 years. A key issue is whether funding any such program will require increasing property taxes.

Woody began his presentation with cautionary statements.

"Tennessee communities have some real problems with how they manage debt," he said.

Some counties have entered into long-term financing arrangements, debt swaps and other financing instruments that are not in the best interest of their residents, he said. The state Comptroller of the Treasury has been revising its guidelines for how communities mange debt, he said.

Under the new guidelines, communities that want to borrow using variable-rate loans or terms longer than 25 years need to consult a debt adviser, Woody said.

Loudon County currently is in good financial shape, he said. The county's per-capita debt is about $632, compared to the national average of about $1,200.

A $47 million loan at 5 percent over 25 years would cost about $3.3 million per year and increase the debt ratio to $1,643, Woody said.

"If you do $47 million, you are looking at a tax increase," he said.

Borrowing any amount more than $30 million for 25 years would require putting more money in the rural debt fund. Woody rejected the idea of going to a 30-year loan to get closer to the projected $47 million.

"The comptroller's office is saying we have to put a stop to this," he said.

County Commissioner Don Miller pointed out to others that the commission has to fund the entire county's budget, including additional school operating expenses and the Sheriff's Department and county jail.

Miller has suggested that he would be comfortable borrowing about $20 million or $25 million over about 20 years.

Commissioner Austin Shaver has suggested that the county could borrow more if it first paid down current debt to get the best loan terms possible. At rates of about 4.5 percent, the county could borrow $35 million over 30 years without a property tax increase.

Both Miller and Shaver agreed that a property tax increase would be required within a few years, regardless.

Officials have been wrestling for months on how best to approach a building program for the school system, most notably Greenback School, that is in need of rehabilitation.