Faced with finding an additional $2 million in funds for Fiscal Year 2015-16, the Carroll County Board of Supervisors will look at possible refinancing options.
The discussion came up after Supervisors heard the budget presentation for Fiscal Year 2014-15 during the board’s April 14 meeting. Although a tax increase appears unlikely for the upcoming year, budget committee member Phil McCraw has called the Fiscal Year 2014-15 budget “by far the tightest budget I’ve worked on in my three years.”
Assistant County Administrator Nikki Cannon told the board the upcoming budget includes $235,280 in operation costs for Woodlawn School and in increase in debt service of $223,551 for the HVAC project recently completed at Carroll County High School.
“That is $458,000 the budget committee was tasked with finding this year outside of normal operating costs,” Cannon said. “One cent on the tax levy is about $230,000, so these costs right here are roughly two cents.”
Even so, the board will hold a public hearing May 5 at 6:30 p.m. on a proposed budget with balanced revenues and expenditures of $39,549,404. Cannon noted that even though the county’s transfer to the school board was level at just over $11 million, when you factor in debt service associated with education, Carroll County’s total commitment to education rises to nearly $15.5 million.
But while this year’s budget appears to be solved, the outlook for the next fiscal year is not as optimistic. Cannon said the county’s citizens need to be aware of the Qualified School Construction Bond (QSCB) debt service payment that will begin in 2016 for the renovations of CCHS and Carroll County Middle School that forced the closing of Woodlawn School.
“The first (payment) is $1.5 million and then it proceeds to $1.25 million for 10 years after that,” Cannon said. “This budget is based heavily on the collection on delinquent taxes, and eventually if you are successful in those efforts you will remove that function in the budget process.”
Adding the $1.5 million QSCB payment for 2016, plus the additional costs to operate Woodlawn School and HVAC debt service payment, means the county will have to find an additional $2 million next year.
“We do have $1.5 million in fund balance for next year and then it is going to get tough,” Cannon said. “So what are our options? Increase taxes or fees, reduce services provided to citizens, or you will notice redistribute resources is crossed off in yellow. We have done about all the redistributing we can do internally. There is going to have to be something…What I want you to understand is there’s not a need to be alarmed right now, but there is a need to be frugal. That is what we have tried to do in this budget.”
Later in the meeting, Supervisor Joshua Hendrick recalled a conversation he had with county attorney Jim Cornwell. The supervisor noted another locality refinanced some previous loans.
“They cut the interest rates dramatically and left the terms the same so you weren’t extended in debt so much. You were just getting a better interest rate,” Hendrick said. “I would like to put that to the board as discussion and somehow wrap that up into a motion that would be suitable for a financial service to help us out.”
Cornwell said several of his jurisdictions have obtained the services of a financial consultant to review debt infrastructure and determine if they could refinance debt so interest rates could be reduced or terms shortened.
“My suggestion is the board issue a request for proposals (RFP) for a financial consultant to see what interest there is in the county, and if there is in interest, what they might recommend as far as going out and refinancing not only county debt, but Public Service Authority debt, school board debt, IDA debt, the whole thing,” Cornwell said. “It’s all in your hands. A financial consultant comes in and says, ‘I think you can consider refinancing this, I don’t think this is worth refinancing, the term is too short, these interest rates are good, leave those alone,’ and you make the decision as to whether or not you want to go out for an RFP for lending institutions to refinance the debt they recommend.”
Hendrick said the way he understood the process was that an RFP would not hold the county to any obligations. He thought usually if money could be saved, that would be part of the financial consultant’s payment.
“Most of these proposals I’ve seen…they come in and tell you what their fee structure is. And then you decided whether you want to hire them or not,” Cornwell said. “Their fee structure may very well be that they don’t charge anything unless you refinance.”
County Administrator Gary Larrowe said prior to issuing an RFP, the county could look internally at its interest rates and loans. Some are tied up, he said, but the initial cost of an RFP could potentially be saved if the county looks at the issue internally.
“Whenever I have a discussion and somebody tells me there is a legitimate potential of savings, that is the reason I want to throw it on the floor,” Hendrick said, “because if you tell me we can save a nickel, we need to look at it.”
Supervisor Phil McCraw said it might be a good idea for staff to check internally first to see what the situation looks like. The county could then decide at a later time what it wants to do.
“I think saving money is what we need to be all about right now,” McCraw said.
Larrowe said staff could have an analysis done in a month and bring it back before the board to see how it would like to proceed. McCraw said that would probably be the best way to approach things.
“As long as we look at it,” Hendrick concluded. “Like I said, if there is a chance to save a nickel, we need to do that.”