Library loan approved

Published 9:58 am Wednesday, November 9, 2011

GATESVILLE – The debt associated with buildingGatesCounty’s new public library will be paid in five years.

At their meeting here last week, the county’s Board of Commissioners voted unanimously to borrow $1.5 million from BB&T Bank to fund the project. After obtaining financing information from three local institutions, to include Southern Bank and RBC Bank, the commissioners selected BB&T due to a 1.77 percent interest rate and a better deal on the closing costs.

At their September meeting the commissioners, in a 3-2 vote, decided to cap the construction price at $1.5 million.

After receiving the loan information, County Manager Toby Chappell recommended payments to be stretched out over a 15-year period (at a 3.37% interest rate), but with the intention of paying off the loan quicker (five full and two partial payments) by using the $562,726 currently earmarked for payments to settle a loan for a recent round of construction projects at county schools. That school debt will be paid in full during FY 2013-14.

Chappell said his plan comes without the need to raise taxes and/or making a significant reduction to the county’s unreserved fund balance.

“This gives the county flexibility on the chance that a catastrophic event occurs and the county needs the ability to reprioritize finances,” Chappell said.

While the flexibility concerns were not lost on the commissioners, most all were in agreement that if the intent was to pay off the library loan in five years, why not do so in order to gain the 1.77 percent interest rate.

“The recommendation is to finance the library for 15 years at 3.37 percent (interest rate),” said Commissioner Henry Jordan. “The rationale behind that was we intend to pay it off in five years, but something may come up and we might want to extend that and we’d already be under a 15-year plan. By the figures given, that will cost us $90,000 (in interest). If we go by the five-year plan, which we will use the $563,000 in retired school debt to pay off the library quicker, it’s a 1.77 percent interest rate. That takes us from paying $1,663,401, we pay $1,573,012. We need to be fair to the citizens. We’re saying we’re not raising taxes, but at the same time we’re not allowing ourselves flexibility to do whatever is unexpected. I would be in favor of the 1.77 percent for five years.”

“Looking over the numbers, the five-year rate is an exceptionally good rate,” Commissioner Jack Owens stated. “The only concern I have is the flexibility issue. I agree with Henry using the five-year plan. That’s our plan to pay it off in five years anyway. I’m okay with the five years as long as we’re all okay with the flexibility issues.”

Commissioner John Hora said the statement made by Chappell in last week’s Index article concerning no tax increase was needed to pay off the library was true and false.

“This is a tax increase indirectly to the citizens ofGatesCounty,” Hora alleged, then asking for what was the county’s current fund balance, to which the answer was $2.9 million.

“If we take $1.5 million out of the fund balance, we’ll still have $1.4 million which meets the state requirement of having at least eight percent in that fund,” Hora continued. “Why do we need to borrow money if we’re going to do this. “Let’s go for it. Let’s pay for it. Why do we need a bank. You know why (we don’t), because there are some other hidden things.”

“I like the 1.77 percent (interest), but I also understand the flexibility issue that might be needed for something else,” said Board Vice Chairman Kenneth Jernigan. “If our plans are to do this in five years, then let’s do it in five years.”

“I understand the attractiveness of the five years, but I feel the need to caution you that you will potentially hamstring your flexibility if there are other events to occur,” Chappell said. “I would recommend against the five years.”

“This is an attractive rate, but you borrow money when you are in trouble,” Hora noted. “We’ve got $2.9 million in fund balance. If you’ve got the money in your pocket, pay for it.”

Jordanlooked at what message this was sending to the county’s taxpayers.

“What you’re saying to the citizens is we’re retiring a debt of about a half million dollars which represents about five cents on their tax bill,” he noted. “What we’re saying to the citizens is we taxed you to pay for the school, now we’re going to retire the school debt and we’re going to pay for the library out of that same tax money, but I’m not going  to reduce your taxes because I want to stay in position that since I’m spending this money here, if I need something else I can continue to keep your money. We never see a tax relief.

“The county has to have a balanced budget,”Jordancontinued. “That means whatever we do we have to tax the citizens. When I retire a debt that I taxed you for, in fairness I ought to give you some money back. But if I keep that money and look for something else to spend this money, when I do need to do something under an emergency, guess what, I’m going to have to tax you more money because I’ve already spent that I could have given back. In that two year time frame I really don’t see where we would put ourselves in jeopardy of not having sufficient funds to do what we need. This is not a long term thing.”

Twine explained the options the board could consider as far as expending money to pay for the new library…loans from BB&T for five years (at a 1.77% interest rate), 10 years (2.39%), 15 years (3.37%) or paying the bill in full upfront by taking $1.5 million from fund balance.

Hora made a motion to take the $1.5 million from fund balance and if the county runs into financial trouble with the fund balance they would ask a bank to lend money against the asset (the new library). His proposal died for lack of a second.

Jordanmotioned to finance the library with BB&T for five years at a 1.77 percent interest rate. Hora offered a second and the motion passed without objection.

With that, Chappell was instructed by the board to put together the exact annual payments based on the five-year loan, including the impact on the fund balance until the point where the retired school debt becomes available to help pay for the new library.

About Cal Bryant

Cal Bryant, a 40-year veteran of the newspaper industry, serves as the Editor at Roanoke-Chowan Publications, publishers of the Roanoke-Chowan News-Herald, Gates County Index, and Front Porch Living magazine.

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