What IF TASS goes Belly Up?
Loudon County Taxpayers Pay!
By: Pat Hunter
March 8, 2009
The TASS finance matter was first discussed, approved and recommended by the Budget Committee, almost one month ago. In attendance were Budget Chairman Mayor Doyle Arp and Budget Commissioners Don Miller and Harold Duff; David Meers was late and Chris Park was absent. According to Mayor Arp, Monroe County was caught in a similar financing situation with a $500,000 note as Loudon County was a number of months ago. But, Loudon County's finance crisis involved $12.5 Million borrowed on behalf of the Loudon County Board of Education in 2001.
If TASS goes "Belly up," Loudon County would owe Monroe County according to Mayor Arp. Commissioner Don Miller wanted to know the reason for Monroe County's refinancing, was it to get a better finance rate, what was driving this action? Finance Director Blair explained in an inaudible voice something about the interest rates going "sky high" on the bonds and Monroe County choosing to finance the whole thing. Commissioner Harold Duff made the motion, which was seconded by Commissioner Don Miller, and unanimously approved.
At the March 2, Loudon County Commission meeting, acting on the recommendation from the Budget Committee, Commissioners unanimously approved a Resolution ratifying and affirming an inter-local agreement between Loudon County and Monroe County on the refinancing of Tellico Area Services System (TASS) debt. Commissioner Bob Franke made the motion and seconded by Commissioner Nancy Marcus; Commissioners Wayne Gardin and Chris Park were both absent.
The loss of the bond insurance company’s rating resulted in the need to refinance one of the TASS bonds and Monroe County agreed to refinance the entire amount including Loudon County’s portion. Monroe County is requesting an interlocal agreement with Loudon County. The agreement outlines that Loudon County would be required to reimburse Monroe County for the potion of its debt if TASS is unable to reimburse Monroe County for debt service payments. Loudon County is already obligated but the agreement would change the mechanism for debt service payments, as well as, reimbursements from TASS.
CLICK to view VIDEO CLIP wmv Commissioner Harold Duff asked the Finance Director, “If TASS goes belly up” the County (Loudon) is involved monetarily along with Monroe County? That’s correct, she replied. Duff said that’s the standard question that I ask, while some commissioners chuckled at his comments.
TASS is a utility company, which was created in 1970 by a joint agreement between Loudon and Monroe Counties. TASS provides water and wastewater treatment for industrial and residential development. Purportedly, building permits are down everywhere so how is the slow economy affecting development in the TASS service area. We know that Christenson Yachts didn't come through with jobs as early PR led us to believe. Monroe County has 14.8 percent unemployment rate because of numerous industries and businesses that are closing or layoffs. It would have been nice if someone on Commission had bothered to ask how the poor economy would impact TASS’s ability to pay its debt. Commissioner Duff's remark did little to sooth concerns. Also, how did the financial crisis affect Loudon County's $12.5 Million debt and Loudon County's bond rating?
The news article below appeared in the Monroe County Advocate Democrat about Monroe County’s refinancing of $23Million TASS debt.
SOURCE: Monroe County Advocate Democrat
County to refinance debt on TASS projects
Published: 8:18 AM, 10/31/2008
Author: Mia Rhodarmer
“The County Commission voted Tuesday night to refinance $23 million in debt. The
debt, which is for work done on the Tellico Area Services System water projects,
had been insured by insurance companies, which have not fared well in the recent
Scott Gibson, vice president of Morgan Keegan & Company in Knoxville, described the last couple of months as a “very trying time.”
“Unfortunately, Monroe County has gotten caught up in the financial crisis,” he said, noting he is giving the same speech in several counties and cities across the state.
In the current economy, the county’s rating had dropped from a AAA to an A or B+, which meant an increase in interest rates.
Gibson recommended the county get away from the insurance companies. “We are looking at banks that we have done business with that are in good financial shape.”
He said bankers from New York have been here to look at the county.
“We are trying to get the county back in shape as far as loans are concerned,” he said. With the refinancing, he estimated the interest rate would be between 4 and 6 percent.
He explained they will call in the old loans and issue new ones simultaneously with organizations not affected by the crisis.
While the county will make the payments on the $23,030,000 debt, TASS will reimburse the county. TASS is owned jointly by Monroe and Loudon counties…”