Brittney Burns – Staff Writer
Heading into the 2017-18 budget season, the Macon County Board of Commissioners made one request clear to County Manager Derek Roland; look at the county’s debt load and see what it would take to eliminate some of that burden.
The county is currently paying off 11 different loans that date back to 2005, with the most recent loan being issued in 2015. The county’s 11 loans total just over $32 million with $30 million of that debt being attributed to Macon County Schools for renovations, new school construction, or technology needs.
The county’s oldest loan was issued on July 29, 2005, for the Macon County Public Library and the county’s portion of the Southwestern Community College Building on the Siler Farm Road Property. The $5 million loan originally had an interest rate of 3.48 percent, but after being modified in September 2012, the interest payments were reduced to 2.19 percent. To date, the county owes about $1.5 million on the loan and is slated to pay $364,358 in interest on that loan payment. By the time the county fully pays off the $5 million loan, which is scheduled to roll off the books during the 2020-2021 budget year, the county would have paid a total of $6.2 million with interest factored in. Macon County Commission Chair Jim Tate said that it may be beneficial to the county to look at loans like the library’s and determine if the balance could be paid off early using the county’s fund balance, which would save taxpayers significant dollars in interest.
During a presentation on the county’s annual audit in January, Jill Vang with Martin Starnes and Associates informed the board that Macon County’s fund balance sits at nearly $8 million more compared to counties of similar size and budget. At more than $25 million, the county’s fund balance could fund expenditures in Macon County for six months in the event that no additional revenues are collected. The North Carolina School of Government recommends county governments keep a fund balance level that would cover the cost of one month’s operating expenses. The county’s fund balance has continued to grow while revenues have increased by 6.5 percent over the last few years, with expenditures only increasing by 3.2 percent over the same time period.
Other loans the county is still paying off includes the $2.6 million loan for the Sanders/Owens property that was purchased in 2007 to construct Mountain View Intermediate (MVI); a $20 million loan issued in 2008 to construct MVI and expansion of East Franklin Elementary; the $12.8 million loan to construct Iotla Valley Elementary School issued in 2010; a $2 million loan issued in 2011 for the Little Tennessee Sewer Project; a $2 million QZAB loan to renovate East Franklin Elementary issued in 2007; a $1.8 million QZAB loan issued to renovate Nantahala School in 2010; a $1.5 million loan used to purchase technology for Macon County Schools in 2012; a $374,000 loan in 2013 used to purchase new defibrillators; a $1.5 million loan issued in 2013 to renovate Highlands School; and another $2.9 million QZAB loan issued in 2015 to renovate both Highlands School and Union Academy.
This year alone, Macon County will pay out $4,285,708.40 in debt payments which includes $958,288.45 in interest.
Some of the county’s debt was issued with no interest. The 2015 QZAB loan issued to renovate Highlands School and Union Academy totaled $2,985,878 and is on schedule to be paid off in 15 years. That loan was issued with zero interest and with the county paying an annual payment of $199,058, will be paid off during the 2030-2031 budget cycle. The 2013 loan also issued for Highlands School also includes a zero interest rate and the $1,500,000 is set to be paid off in full by 2022-2023. The 2007 loan for East Franklin School was also a QZAB loan issued at zero interest through the Bank of America and is scheduled to roll off the county’s books in 2022-2023.
Each loan is different and may come with provisions that call for penalties for early payoffs, which was something the county considered last fall before paying off the $1.5 million loan that was issued to construct the Parker Meadows Recreation Complex. With no pre-payment penalties attached, then Commission Chair Kevin Corbin asked his fellow board members to pay off the loan utilizing fund balance dollars, freeing up nearly $300,000 in annual debt payments in the county budget. Commissioners unanimously agreed and began thinking of other loans that may be as beneficial to the county to pay off early.
The county’s most expensive loan was issued in 2008 for the construction of Mountain View Intermediate School and the expansion to East Franklin School. The 20-year, $20 million loan originally had a 4.49 percent interest rate. In 2012, the interest rate on the loan was reduced to 2.61 percent. If the county follows the current debt payment schedule for the loan, the project will be paid in full in 2028-2029, with the county paying a total of $26,940,275 when interest is factored in. Right now, Macon County pays $1,319,725 a year for that loan, $319,725 of which goes toward interest. Paying that loan off now would potentially cost the county $12 million, but would save the county $1,800,900 in interest payments over time.