August 2016 Commission Report

Debt workshop
A special commission meeting was called for the purpose of discussing debt refinancing options.  The county has $79,435,000 in outstanding par for the Series 2013B general obligation refunding bonds.  The 3 year note for this series will expire in December.  Thus, the commission will soon need to make a decision on how to refinance this debt.

There are 4 interest rate swaps with Deutsche Bank associated with this variable rate debt.  The cost to terminate the swaps is high.  It changes frequently.  You can view the monthly swap reports in the monthly budget packets online.  The most recent swap report, found in the July 11, 2016 Budget Committee packet, shows a mark to market value of $14,912,989.89 on June 29, 2016.  See page 287.  The value given at the workshop, as of July 11, 2016 was $15.2M.

The cost to terminate the swaps is negotiable.  According the county’s advisor, Public Financial Management (PFM), Deutsche Bank (DB) has not been willing to negotiate significant savings in the past.  However, due to a recent drops in the credit ratings, DB is more willing to negotiate.  Now may be a good time to terminate these swaps.

This meeting was much more useful in terms of options than the meeting called last October.  The presentation given in October gave 3 variations of keeping 20% variable rate debt in place.  This 3 options given this month include two which would refund every callable maturity (2004A, 2004B, 2005, 2011, 2013B, B-16-A, B-17-A & B-10-A) and one option to refund $39M of variable rate debt.  The county has other series of debt that can be refinanced at lower interest rates.  These series would be included in refinancing scenarios A and C that were presented to us.

Option C appears to be the best option because it eliminates all variable rate debt, terminates all swaps and has the county paying debt at a more consistent level than option A which also eliminates the variable rate and terminates the swaps.  This reduces the risk to the county and we would know exactly what we owe in terms of debt.  The county currently has about $11M in fund balance.  Option C would use $5M of this fund balance, leaving the county with about $6M in debt service fund balance.

It is my hope that the commission votes to approve option C or something similar when it is presented to us in the near future.

Commission meeting
Spending increases
There were several spending increases and all were approved.  This commission has shown that it will approve nearly every spending request put before it.

The biggest spending request came from the schools and was more than all the other requests combined.  The schools requested a $1,639,000 million increase for the General Purpose Schools Fund.  $397,000 of this request will be funded with a projected increase in sales tax revenue.  After a big property tax increase last year, closer attention should be paid to the other sources of revenue such as the sales tax before levying such a huge property tax rate increase.  The property tax payers may have been hit harder than necessary.

Last month the budget request failed to even get a motion to send it to the commission but this month it passed.  The request was the same as last month.

Animal shelter budget now over double the actual budget of 6 years ago
The animal shelter requested a budget increase of $33,054 to pay 2 part time people to clean the animal shelter after losing inmate labor when the state pulled the TDOC felons from the local jail.  I purposed using donation money given to the animal shelter to fund these two positions temporarily until the changes in jail population had been worked out.  That amendment failed.  The requested increase could have been funded without any use of tax dollars.

From Deena Finley the Accounting Manager:

“To Commission,

To follow up on the questions from August 19, 2016 Commission meeting:

Item F.3 – Resolution No. 16-08-008

In regard to donations for the Animal Center, the amount I reported at the meeting was the Total Non-SMACF donations collected for Fiscal years 2011 through 2016.  Please see below.

Fiscal Year     Donations Collected

10-11           32,862.58
11-12           25,144.32
12-13           16,253.20
13-14           8,202.09
14-15           13,867.31
15-16           76,192.09
Total           172,521.59

The amount of Committed Donations as of 6/30/2015 (account 101-346300 – Committed for Public Health & Welfare) was $16,069.40 and from above collections Year-to-Date of $76,192.09 which means the value of Committed Donations at 6/30/2016 should equal the sum total of $92,261.49, subject to Audit.”

Labor of the animal shelter isn’t limited to those serving sentences in the jail.  There are about 1800 on county probation and 700 people on state probation.  This is a large number of people to look to for help in the animal shelter.

Animal shelter spending was originally budgeted to be up 86%, compared to 6 years ago when the mayor took office.  With the budget amendment, the amended budget is now more than double what the actual budget was when Mayor Ed Mitchell took office.

FY Actual Budget SMACF Donations Original Budget Amended Budget
2007 $131,849 $138,349 $138,349
2008 $102,846 $148,349 $138,349
2009 $124,142 $138,349 $138,349
2010 $157,459 $135,826 $203,326
2011 $223,941 $414,806 $414,806
2012 $263,901 $361,710 $361,710
2013 $272,685 $330,419 $330,419
2014 $320,388 $330,407 $327,310
2015 $322,742 $76,139 $342,931 $355,426
2016 $371,126 $180,400 $407,727 $415,217
2017 $182,090 $417,315 $450,369

2007-2014 data is from state CAFRs
2015-2017 is data from the county’s website
2016 data is subject to change as budget is finalized
2017 data is budgeted amounts not actual amounts

There was a request to spend $195,000 of the Drug Control fund balance.  The only explanation given was to buy needed equipment and there was no date on the budget request.  That is a lot of money that will be spent without any details given for the use of the funds.

Half way point
The end of this month marks the half way point of this commission term.  As I look back over the past two years, I think the best thing this commission did was refinance $20,165,000 in variable rate debt and the swap attached to it to fixed rate debt.  Creating the school capital fund, providing funds that don’t have to be split with the cities to fix leaking roofs is another good thing.

The large property tax increase after an increase in the local option sales tax may have been the worst thing this commission has done.  The unwillingness to hear from the jail consultant while approving an RFQ to seek design services for the jail doesn’t make good sense or good public policy.

What I’d like to see over the next two years is for the county to go to completely fixed rate debt with more debt service money going to principal.  I’d like for the commission to take a look at the county’s land use regulations, particularly zoning which is too easily manipulated for the benefit of the few.  The Blount County Corrections Partnership (BCCP) should meet to actually discuss the needs of the criminal justice system rather than just meeting a few times a year to appease the state for certification that means very little.  Critical decisions that should have been fully discussed through the BCCP are going to be made through the Purchasing Department.  Additionally, the commission should look at the over $1 million that is given to the Industrial Development Board and the approximately $1.5 million in hotel/motel tax money given to the Smoky Mountain Tourism Development Authority.  Both of these entities serve special interests with crony deals.  These monies could be put to better use by paying down the enormous county debt.

What would you like to see your county government do during the next two years?

13 thoughts on “August 2016 Commission Report

  1. There were a couple of other issue on the agenda that were discussed. Even the newspaper touched on one. What became of the appointment of the magistrates and the guns for the retiring deputies. You didn’t mention those issues in your commission report?

  2. “Deutsche Bank”, one of worst players in the mortgage fiasco that hurt many. And we do business with them. Dumb.

    Concerning the animal shelter, I can’t believe it takes a special kind of prisoner to clean dog pens. Does the sheriff realize how that comment makes him look?

  3. I can’t understand how people who have a higher education can not make out a budget. Why are the schools always asking for more money? Its not the amount so much, its why are their numbers so far off when they prepare their budget?

    • Probably because most of their funding is provide by the Tenn State Dept of Ed but only pass-through allocated by the county. The various state departments that provide funding via this mechanism only provide estimates of future revenues based on collections. This makes the county departments deal with the burden of fluctuating revenue deposited in the rears, not a real time balance, or up front. If you were to invest more time in understanding the process, your criticism would likely be more temperate and no doubt more valuable.

    • The $1.639M budget increase only included $2,000 of projected state BEP money. That is less than 1% of the requested increase.

      • I don’t believe it was an increase. I think it was an ammendment. The budget now matches the allocation made by the county. The commission had already set the tax rate. No new funds went to schools. Only those that had already been allocated that created a find balance.

        • You’re free to “believe” and “think” as you wish. However, reality is different. The box checked at the top of the budget amendment request is increase and the description says, “Increase to balance adopted budget with BOE approved final budget request.” The commission does not have to vote to approve funds that have already been approved in the current budget year.

  4. Thanks Tona the only true report is from you what do these other
    Commissioners do? It is very smart to use those on probation as volunteer’s
    at the Animal Shelter no better way to help reform a personality is to
    bond with an animal. It makes a person feel better to help an animal who
    depends upon human hands to live. This is rehabilitating the parolees into
    being a better person who feels needed. Take advantage of local resourses
    to pay it foreward. Why cann’t the animal shelter Supervisor implement a program rather than taking the easy way out asking for more money. So many ways to save and have a budget helps everyone especially the budget.
    Future times are going to be worse lets care about our Community.

  5. Pingback: Paper reported that Blount County Animal Shelter has about 250 active volunteers | Blount County (BC) Public Record

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