News

Finance committee members hear proposal for school funding

By Betty Chandler

April 29, 2008

Members of the Unicoi County Finance Committee met Thursday evening, April 24, to discuss financial matters which, if passed, could affect Unicoi County for decades.

Richard “Rick” T. Dulaney, Managing Director of Public Finance for Morgan Keegan & Company, Inc., met with members of the county finance committee and some of the members of the Unicoi County Board of Education to discuss an approximate $18 Million debt which the county would need to borrow in order to build a new Unicoi County Middle School and pay interest on the debt.

The firm of Morgan Keegan & Company handled the financing program for Washington County Schools about a year ago, The Town of Erwin’s electric distribution system financing, and most recently a project for the Johnson City Power Board and the City of Johnson City, as well as other municipalities and counties in the surrounding area.

Dulaney, in talking with the county officials, presented several methods of paying for county improvements, including traditional bond issues, ranging from 25 years to 30 year amortization schedule, as well as both fixed and variable rate transactions. The financial expert told the group that at this precarious time in the financial world, his recommendation would be a fixed-rate indebtedness, locking in a low interest rate, and a shorter time frame.

Dulaney told the group that the variable rate mortgage industry has been very unsettled in recent months because of issues within the bond insurance companies.

He told the group that the magnitude of an $18 million project would be a pretty big chunk for any county, no matter what the size.

Reviewing figures furnished by Morgan Keegan, Delaney noted that the next few years will be somewhat challenging for Unicoi County because of the debt load the county is carrying. The debt will begin to drop slightly around 2011, with a steeper drop around 2012, and on down to a negligible amount by 2021. The financial rep recommended that the group consider a schedule that would be conservative Delaney told the group that as the old debt rolls off, Unicoi County should have the ability to finance without adding to the debt service fund through the tax rate or other sources. County Finance Chairman Dr. Mickey Hatcher appeared to support a more level type of debt load.

As of the end of fiscal year 2007, the county debt amounted to $15,052,850 in principal fixed-rate debt. By the end of this year, that amount should drop to roughly $14 million.

Looking toward financing, Dulaney told the group that the county has a very good rating for one the size of Unicoi, meaning that a good interest rate would be possible.

Looking at different means of financing new debt, Delaney told the group that a 25-year level debt, and be done with it. For the next 8-10 years, he said, cash flow would be critical payments leveled off. Delaney also cautioned against looking at growth patterns, rather look at what Unicoi County has today.

County Mayor Greg Lynch noted that the construction period on a new school would be two years, and if the bonds are sold, there would be a period for the county to invest the funds. Debt service wouldn’t start for at least a 3-year period. Delaney said the county does have the ability to carry the debt somewhat. He added that this amount would give a pretty negligible return. County commissioner Doug Bowman noted that the total master facility plan for Unicoi County Schools is set at an additional $10 - $12 million in five years. Delaney told the group that plans should be made at this time to cover that indebtedness, as well.

Mayor Lynch noted that financing that’s being proposed in the State Legislature, a lot of that may be picked up through the county budget, on a yearly basis. The group noted that Governor Bredesen was looking at a $5 million shortfall in the current year budget. Delaney told the group not to count on growth years, because shortfalls like this could offset the program five years down the road.

The county finance committee and school board members noted that they would be speaking with additional financial firms in the near future.

Discussion followed concerning the potential for adding to the property tax rate, or a wheel tax, or a combination of both, if needed. Dr. Hatcher said the group needed to consider how the taxpayers of Unicoi County could be impacted by any increases. The officials present all agreed that there is a need to protect the welfare of those who are currently living on modest incomes and Social Security.