Bond debt problem goes back years

Posted 8/12/17

Daily Mountain Eagle

Walker County’s debt problem did not arise overnight, but has been a public headache for about 15 years, back to a time when the old commission would borrow to pay existing debt it could not pay.

The current commissions …

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Bond debt problem goes back years


Daily Mountain Eagle

Walker County’s debt problem did not arise overnight, but has been a public headache for about 15 years, back to a time when the old commission would borrow to pay existing debt it could not pay.

The current commissions had no part in the beginning of it: Keith Davis and Steven Aderholt started on the commission in 2012, with Bishop, Jeff Burrough and Ralph Williams joining them late last year. Major figures in key county positions underneath them have also changed. All the current commissioners are pushing now for the 1-cent sales tax on the Aug. 15 ballot, which is set to bring in $7 million a year for various needs, including debt payments.

Voters will go from 7 a.m. to 7 p.m. Tuesday in the county to vote on the tax, as well as in the U.S. Senate primaries.

The serious nature of the county’s debt became more known in the county on Dec. 10, 2004, when the state Department of Examiners of Public Accounts issued a thick and blistering audit of the commission from Oct. 1, 2002, to Sept. 30, 2003. Another one was issued from Oct. 1, 2003, to Sept. 30, 2004, in a Dec. 9, 2005, audit.

The commission in place at the time took out bonds in a 2002 issue for $9.5 million in projects that auditors said might not outlive its 2032 retirement date for financing and would cost a total of $27 million overall. Moreover, a $21.5 million bond issue (including interest) was taken out in 1998 for the jail, and it had trouble paying off a scheduled increase of $635,000 on the county jail bond issue, with a total payment due of $934,120 due. As the county could not afford the increase, the county in 2003 took out a $700,000 bond issue to pay the principal and part of the interest. With interest, the total cost of that issue was $1.2 million, or twice the cost of the increase.

The Citizens Financial Analysis Team which wrote a report on the county’s finances in 2015 noted that state auditors were never consulted for advice and that the commission has postponed payments of current normal operating expenditures for 17 to 29 years in the future.

In January 2005, Birmingham News columnist John Archibald devoted a whole column to the Walker County debt.

“In September 2003, for the third time in two years, Walker County commissioners issued bonds that will put future generations in a financial pit, if not bankruptcy,” Archibald wrote. He quoted Mike Scroggins, head of county audits for the Examiners office, saying, “This is worse than any tax that could ever be put on those people. Unless something really changes, they are going to be in real trouble.”

In November 2012, after an election that focused some on the debt, a new commission was elected. District 1 Commissioner Keith Davis was elected to his first term after saying he had a plan to deal with the debt.

Before the 2012 elections, he said, “I have a comprehensive plan to tackle the county’s debt. i believe we’ve had a huge mismanagement of assets that has put everybody in a bind.”

By Feb. 4, the commission was already hearing proposals on refinancing the debt, hearing proposals from several bond attorneys, who said the county could save $2.5 million to $3 million.

Davis said the county could save money by refinancing, noting the 2002 issue was a major concern.

“They borrowed $9 million and promised to pay back $27 million. That just doesn’t make a lot of sense,” he said at that time. “The payment on that $27 million will due in a few years and refinancing now will help us to be better able to take care of that payment in the future. The debt is there, so we can’t get rid of it, but we can put the county in a better place to pay the debt.”

Later in the month, District 4 Commissioner Steven Aderholt said the $27 million bond deal “was the worst bond deal in the history of the United States and it happened in Walker County. We have looked as in-depth as we possibly can at taking care of this situation.” 

On Feb. 12, the newly elected Chairman Billy Luster (who is not on the current commission) spoke to the East Walker Chamber of Commerce, noting the commission had to pay $27.2 million over the next three decades on a $9.5 million loan. The interest rate on the main loan was noted to be 3.972 percent.

“The money from the loan was used to make road repairs, pay employees and finance other day-to-day operations in the county. This would mean from 2018 to 2032 the county would owe approximately $1.7 million each year. The general fund budget is based on approximately $22 million per year, although many of these funds are earmarked for specific issues,” the Eagle wrote at the time.

Luster also said the debt was his primary concern, noting the need to restructure the debt to lesson the impact on citizens. He noted the county's solid waste department had faced shortfalls of more than $300,000 for each of the previous three years. Luster said the first step was cutting back on unnecessary overtime and using district employees as needed to supplement shortfalls. Luster said the commission has cut costs where available, including eliminating the use of county vehicles for personal use.

Finally, on May 20, 2013, the commission approved a debt refinance to save the county $3.8 million over a period of 14 years. Along with the savings, the refinance also brought the county an "A-plus" credit rating, according to representatives from Sterne Agee, the firm handling the agreement.

"What this commission has done is taken that bad decision and restructured it to save the county almost $4 million," Davis said at the time of the refinance. "This is a major accomplishment for our county and the 70,000 people we represent."

Payments on the debt refinance were to begin in 2018 and continue through 2032. Davis said the savings would average about $300,000 per year.

Today, the current commission points out it has made other cost-saving moves and improvements since the last term, with Davis saying that 4.5 percent in budget cuts were at the time of the refinancing. Solid waste operations were streamlined to reduce solid waste’s $300,000 annual deficit, while automated trucks were introduced, its offices were moved to the courthouse and thousands of customers were added. Davis says the program is now breaking even.

Commissioners noted patrol units and a van were purchased, saving money on maintenance of old vehicles. Perimeter locks on the jail were repaired, laptops for deputies were provided while they are on patrol, and video was set up between the jail and the courthouse to eliminate transporting inmates to the courthouse. Video visitation was also introduced July 1 at the jail to further eliminate transferring prisoners.

The Treasurer’s Office was abolished, saving $100,000 a year, and the streamlining of office supply ordering saved $50,000 a year. New deals were made for software and retiree health insurance. The phone bill was negotiated for $40,000 in annual savings. (Commissioners point out a new phone system could give additional savings of $24,000 a year.) An employee safety program was started that has resulted in $21,000 in returned costs from its insurance program.

The independent Citizens Financial Analysis Team looked at the county’s financial situation in 2015. The commission suggested in its report that year the county consider the 1-cent sales tax increase, as well as a property tax increase. It noted property taxes have not been raised in some 50 years.

Among a number of suggestions, the committee also suggested eliminating the Civil Service Board at an immediate savings of $100,000, review insurance and retirement plans, considering a countywide mandatory garbage pick-up fee, review the contract for the East Walker County Landfill for revenue improvements and consider moving to a modified unit system of operation.

The unit system option “has the potential to make significant impact on the county’s financial position,” the report said. “A survey of commissioners and staff/administrators from four counties with similar demographics indicated that roads are now being upgraded according to priority and not politics. They have consolidated their equipment, developed their own road grading crew and have begun re-evaluating road conditions. It has increased productivity and safety and they have begun doing an inventory of both public and private roads that were previously serviced by the individual districts.” 

Overall on the county’s finances, the committee wrote, “We believe that failure to address the county’s financial issues will have a negative impact on the future of our county. Without revenue enhancement and cost containment, jobs will be lost and the probability of a retrenchment in economic, industrial and community development will occur.

“Our goal as volunteers has been to offer information to the Walker County Commission that they could consider to avert what we believe to be a looming financial crisis in this county.”

Today, with the jail paid off, there is a general obligation bond and a Public Building, Bridge and Road issue, both from 2013. It is that refinance that is leading to the principal coming due next year, so that with interest the county will be paying $1.5 million a year for 15 years, based on a payment schedule that was already in place and forcing the county to take action.

The commission this year is facing a major deficit next year as the principal of the debt comes due. Commissioner Chairman Jerry Bishop said Monday when he ran last year, he was committed to coming up with a plan to solve the county’s financial situation, which resulted in the plan on Tuesday’s ballot.

Davis said Monday that since he and Aderholt took office in 2012, the county has saved $7 million to $8 million by taking all the actions together to save money. He noted officials have worked long hours just to “keep the lights on.”

“If we had not done the things we did starting in 2012, we would already have been at the brink of this way before now,” Aderholt said. “A lot of those cuts and things that needed to be done have been done along the way, and that has got us to this point.”