Bishop: Debt will have to be paid regardless if tax passes

By ED HOWELL, Daily Mountain Eagle
Posted 5/24/17

The Walker County Commission talked at length Monday about the need for passing a 1-cent sales tax, with the chairman noting a bankruptcy lawyer had said the county might as well raise funds anyway as it will have to pay for its current debt one way …

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Bishop: Debt will have to be paid regardless if tax passes

Posted

The Walker County Commission talked at length Monday about the need for passing a 1-cent sales tax, with the chairman noting a bankruptcy lawyer had said the county might as well raise funds anyway as it will have to pay for its current debt one way or another.

Commissioners spoke at Monday’s commission meeting about the issue before setting an Aug. 15 referendum date for voters to decide the tax increase, which would pay for debt and other needs. Commissioners stressed that road, bridge and infrastructure work would be the largest single expenditure earmarked from the $7 million raised from the proposed increase. The county would use $4.2 million for road and bridge projects, while $470,000 would go for municipalities, according to county figures released last month.

The county’s attorney, Eddie Jackson, said after the meeting the commission consulted with attorney Jay Bender of Bradley Arant Boult Cummings LLP. Bishop said during the meeting the commission had talked to the bankruptcy lawyer who had handled Jefferson County’s bankruptcy.

“He was the one who said, ‘You’re going to pay it anyway. You might as well find some more revenue,’” Bishop said, turning to Jackson to confirm the statement.

County officials stressed that if bankruptcy is declared, the county would not be able to get out of paying its 2002 debt, whose principal will start coming due in February. The debt is threatening to create a $1.4 million deficit in the coming Fiscal 2018 budget, which starts Oct. 1. About $1.5 million a year would be dedicated annually from the new tax to pay off the debt over the next 15 years.

If bankruptcy was declared, Bishop said a bankruptcy judge would continue to force the county to pay its debt, and the county would not have the ability to immediately raise a tax by that point.

“Government bankruptcy is not like the average person out there going bankrupt,” Bishop said. “We still have to pay that debt.”

Bishop feels a bankruptcy judge would essentially force the county to make cuts to pay the debt, which in turn would lead to cutbacks, such as closing offices some days and parking road equipment.

He said he was doubtful that all the bondholders would agree to a negotiated reduction in the debt.

District 4 Commissioner Steven Aderholt clarified if the judge forced payment of the debt, “that doesn’t have anything to do with the road system. We’re not in debt for roads. We’re in debt for what we are in debt for.” 

He said the money that would go for road paving would be the largest segment set aside from the sales tax. “The debt is a smaller portion of it, and certainly we will take care of that debt.” 

When a reporter responded that the debt was what prompted the tax in the first place, Aderholt agreed that this was the “end of the cliff” as far as the debt, and it had to be paid in the new budget starting on Oct. 1.

“We have to account for it,” he said. “The road issue is an ongoing issue, but it is at a breaking point as well. Again, fixing both issues is a logical solution. But the largest portion of that tax will go to county roads.”

Bishop said as a small businessman over the years, he said small businesses understand that a major debt that can’t be paid can destroy an entire company. However, he also agreed the roads were needed for the county.

“We don’t need to bankrupt for several reasons — the development authority, businesses. It’s not good. The whole county is coming together on this,” he said. “You are seeing municipalities and the county work together better than they have for years.”

Earlier in the meeting, Bishop said many people support the tax increase, but that more support will be needed. He noted that a private group of supporters will help in privately funding a campaign to help pass the increase, without using county funds.

“We have so much to do out there, but we can’t keep up the good stuff without passing this referendum,” indicating he can’t stress that enough.

Bishop said he also felt good about the fact that the revenue was all earmarked in one way or another. “I’m proud of this,” he said, added everyone can be proud of it and that local officials were standing united about the plan.

District 2 Commissioner Jeff Burrough thanked Bishop for taking a leadership role in the effort, as it is not easy talking about a new tax. However, he said the county’s road system was distantly behind other counties.

“I look at it as something going forward that we are using for the infrastructure in our county to help our younger people,” he said, adding the younger generation will not stay if the county stays the same.

District 1 Keith Davis said the road and infrastructures could be kept the same, and major cutbacks be made to pay off the debt — or have the citizens decide how to use their tax dollars and if they want an increase in the tax.

“Letting the folks vote on this is the right thing to do, period,” he said.

Davis said the county’s $10 tag fee for auto and boats — which raises $734,000 a year and helped fund the Walker County Jail — would be eliminated and several entities would be helped by passing the tax, including firefighters, economic development, courthouse security, sheriff department needs, municipal road needs and county road and infrastructure needs.

“We have 1,200 miles of roads and 100 bridges, and (County Engineer Mike Short) can tell you of the lack of funding we have to pave one mile,” Davis said. “It costs roughly $90,000 to $100,000 a mile to asphalt a road. In my district, I have 226 miles of roads. My total district budget is $800,000. We can all do simple math and understand that is not enough funding to maintain roads, much less to maintain bridges, so we are at a crucial point in this county.” 

The county has a $22 million budget, and cuts have been made, while debt has been restructured, he said. “We’ve done all these things we can do,” which now leaves it up to voters to come up with the next solution, Davis said.

“We can continue down a path I personally don’t want to go down, or we can have an increase in revenue and provide the services we want to provide for this county, and continue to increase the quality of life and the opportunities for the citizens,” he said.

District 3 Commissioner Ralph Williams, who indicated he supports the tax increase, said he could not emphasize enough that in passing the tax question, the proposal would then be formally adopted and the commission could not change how the money would be spent the next day.

“It will be the law and that’s the way it will be from here on out,” he said, unless the commission goes through the same legislative and referendum processes again.

Aderholt said it was a choice for the voters between the status quo or a better future. If the revenue is approved, “our county road system is going to be better than it ever has been before,” he said.

About 40 miles of new paving would be approved for the county each year, or about 10 miles per district.

“Over the past five years, I’ve been able to pave a total of about six miles in District 4, based on the funds I had,” he said.

Aderholt said locally fire departments are also struggling financially, particularly Hay Valley and Piney Woods. Departments are holding fundraisers to keep the lights on, he said, adding the failure of a fire department would also lead to major increases of homeowners insurance.