Lazaro Aleman
ECB Publishing, Inc.
Commissioners weren’t too happy to learn recently that the county will have to pay as much as $30,000 more annually in interest rates over the 20-year life of the $4 million bond that they are trying to secure to finance road improvement projects.
The commissioners blamed this increase on someone having dropped the ball, when they first heard the unwelcomed news at a meeting on Thursday, April 21. However, when the commissioners met again on the issue at a special meeting on Tuesday, April 26, they were
inexplicably amenable to the situation and approved going forward with the bond with no hesitation.
The reason for Tuesday’s special meeting was that Clerk of Court Kirk Reams had not been present at the earlier meeting to provide information on the county’s fuel tax revenues, which monies go both to fund the Road Department and pay back debt services.
The figures that Reams presented on Tuesday showed the county getting fuel tax revenues of $1,254,962 through March of the current fiscal year, which amount he annualized to show expected revenues of $2,398,300 by the end of this fiscal year on Sept. 30.
The figures put the Road Department’s maintenance budget at $1,595,850 through March of this year.
And worst-case scenario, should interest rates continue to rise, it would put the county’s combined annual debt service (including the payments on two earlier bonds) at $996,822, reflective of the $30,000 increase.
It was Reams’ argument that the interest payments on the new bond weren’t likely to be as high as $30,000, since it was expected that the bond would be secured in the next 10 or so days. The more likely scenario, he said, was that the interest payments would amount to an extra $10,000 or $15,000 annually.
It was furthermore his argument, which County Coordinator Parrish Barwick supported, that the savings that the county would realize in reduced costs for the maintenance of dirt roads would more than make up for the extra amount that the county would be paying in interest.
That, at least, Reams said, had been the case with the two bonds secured in 2012 and 2018. And it was likely to be the case with this latest bond, he said. All told, the county has now secured three bonds for road improvement projects, beginning with the first in 1992, which was paid off in 2012.
A question arose as to whether the city, which is part of the present bond-seeking effort, would have to pay part of the extra interest; or if the county would absorb the total increase. The way it was left, the question was to receive more discussion.
Even so, the commission unanimously approved an amended resolution that re-authorized the appropriate parties to proceed with securement of the $4 million bond.
The commissioners’ moods, however, weren’t so amiable at the meeting on April 21, when they first learned about the extra interest fees.
This earlier meeting started with an update report via Zoom by Attorney Mark Mustian, of Nabors, Giblin and Nickerson, the county’s consultant counsel on the bond. Mustian told the commission that despite its February resolution authorizing the appropriate parties to proceed with the bond, the resolution would have to be redone because interest rates had gone up in the interim.
And so the previously passed resolution would have to be readjusted with new parameters, Mustian said. Meaning, he said, that the resolution’s language would have to be amended to say that the interest rate could not exceed 4.55 percent, up from the maximum rate of 2.50 percent indicated on the February resolution.
“The rate will probably be less than 4.55 percent, but things now are very volatile,” Mustian said, adding that the increase to the debt service could go as high as an extra $30,000 annually in the worst-case scenario.
Commissioner Stephen Walker wanted to know who or what had caused the holdup. The commission, he noted, had passed the resolution in February precisely to lock in a lower interest rate. He wanted to know why that hadn’t happened, and who was responsible for it not happening and putting the county in its present predicament?
“I’d like to know who was responsible and who didn’t do their job like they were supposed to do it,” Walker said.
Commissioner J. T. Surles agreed.
“We passed the resolution in February to get the rate locked in,” Surles said. “I don’t know who dropped the ball, but it appears that someone did.”
Mustian offered that the delay had been caused by a combination of factors. One, he said, had had to do with waiting for the county’s audit for the 2020-21 fiscal year to be submitted. The other, he said, was that the rating agencies were running behind in their assessments because of a backlog of work.
No one, however, could say when the audit had been submitted, as neither Reams nor the auditor, CPA Chris Moran, were present in the room or via Zoom.
Commissioner Chris Tuten and Walker pressed for answers.
“I want to know who didn’t turn the audit in on time,” Tuten said.
“We need to find out what’s going on,” Walker said. “We’re looking to pay $30,000 a year extra because of a late audit.”
County Attorney Scott Shirley offered that Walker’s was a reasonable conclusion, adding that the date that the audit had been submitted should be easily knowable.
He noted that when audits were completed and approved, copies were submitted not only to the board members, but the report also was filed in a big data bank with the Securities and Exchange Commission (SEC).
“All the bond rating agencies have access to this data bank and all the financial advisors can also access the data base to determine the liquidity of access and whether Jefferson County is a good financial risk,” he said. “That’s why it’s filed there. So the date that it was filed should be a known date. I don’t know when that date was. But it should have been a date last fall.”
Mustian offered the commissioners several options. One, he said, the commission could table the matter and make a decision at a later meeting when they had all the necessary information on the gas tax revenues. He cautioned, however, that the delay could lead to higher interest rates.
Two, he said, the commission could sign off on the resolution with the caveat that it wouldn’t be sent forward until the chairperson or a board-designated individual was satisfied that the necessary information had been provided.
Three, he said, the commission could call a special meeting as soon as possible to get the necessary information and make the decision.
“Time is of the essence,” Mustian emphasized.
The board chose the latter option, with instructions to Shirley to find out in the interim when the audit had been submitted.
It was also Walker’s suggestion that Moran should be present at the special meeting, as the latter could best answer questions about the audit.
Walker, however, wasn’t done with the issue. Toward the end of the meeting, he raised it again.
“It seems that every week we come up here and we find that somebody hasn’t done what they needed to do and it puts us in a bind,” he said. “And sometimes, we find they’re lying. It seems that we need to have some kind of way that people are held responsible. I don’t know if we should impose a fine. But we can’t continue to have these kinds of issues. Every time we have a meeting, it’s something financial that we didn’t see coming.”
“It shouldn’t happen like that,” Walker continued. “If people have been in a position long enough, they should know what the rules are. We need to do everything within our power to find out who’s responsible for this mess.”
The foregoing meeting, Walker said, had been a perfect example of what he was talking about.
“I had no idea that this thing tonight was taking place,” he said. “We should have been notified somewhere along the line instead of waiting two months after the fact to find out it’s going to cost us $30,000 more a year. We need to find out who is responsible for this.”