County may borrow $3M to make budget

Published 7:47 pm Tuesday, June 12, 2012

CPA Perry Henry recommends to the County Board of Commissioners that it should take out a TAN loan of up to $3 million to meet its upcoming financial obligations.|Justin Schuver

The Decatur County Board of Commissioners agreed Tuesday to borrow up to $3 million from a local bank, in order to help the county meet its budgetary needs in the coming months.

Perry Henry, a local CPA who has been assisting the county in its planning for the fiscal year 2013 budget, told commissioners Tuesday that the county will likely not take in enough revenues to meet its immediate needs.

Henry suggested that the board authorize County Interim Administrator Gary Breedlove to ask local banks to submit proposals for a Tax Anticipation Note (TAN) loan. A TAN loan is a low-interest (usually 2- to 3-percent) loan used by municipalities to meet immediate financial needs. It uses expected future property tax revenues as collateral, and must be repaid in full within one year.

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Henry explained that the county would only pay interest on funds it draws out from the bank.

“If you don’t draw it out, you don’t pay any interest on it,” he said. “My recommendation would be an amount not to exceed $3 million. It’s not that I think we need that, but it’s good to have a cushion. Just when we think we had everything under control in the budget, then there were some more bills that we had to deal with.”

Henry said one upcoming major expenditure is the approximately $1.5 million the county is paying Motorola to upgrade its first-response and broadband communications systems, in accordance with a federal mandate.

“Right now, I don’t think you have enough cash in the bank to cover it all,” Henry said, noting that TAN loans are regularly used by governmental bodies to meet immediate needs. “As you get into July, August and September, the current inflow of cash … is not going to be sufficient to cover those months of operating expenses.”

County Board Chairman Dr. Charles T. Stafford asked Accounting Technician Michelle West what revenues the county collects in the summer months. West said most of what is received is local option sales taxes, motor vehicle taxes and some mobile home taxes.

Henry pointed out that most of the county’s revenues are collected “at the start of the year” when property tax returns come in during December and January.

“That’s usually good enough to get you through the first part of the year, but then once you get to June or July those funds start to dry up a little,” he said.

Commissioner Dr. Earl Perry made a motion for Breedlove to pursue taking out a TAN loan, and the motion passed unanimously.
“We still need to do some serious cutting in our budget as well,” said Breedlove, noting that the county’s fiscal year 2013 budget is due by June 30.

Henry said TAN loans are only a temporary solution to a budgeting deficit, and are far from ideal.

“What we need to do is buck the trend and get back to where we have a surplus and money in reserve to meet these needs,” he said.

“Amen to that, brother,” Commissioner Frank Loeffler responded. “Even if it’s only a 2-percent or 3-percent interest loan, that’s still money that we don’t need to be spending right now.”