With the stroke of her pen, Walker County sole commissioner Bebe Heiskell on Tuesday entered into a one-year loan agreement to pay off $4.5 million in past-due loans to Regions Bank and Erlanger hospital.
Tax anticipation loans are commonly used to fill short-term needs for cash, while the county awaits revenue from taxes and fees.
Taking out such a loan so early in the calendar year is due to creditors demanding payment of loans required by Hutcheson hospital to make payroll and continue operations.
Rosemawr Municipal Partners, a New York-based hedge fund specializing in municipal credit instruments, is extending up to $10 million as a line of credit to the county in anticipation of tax collections.
Walker County expects about $17 million of revenue during 2015 and could have borrowed up to 75 percent — about $13 million — against those collections. Rather than take a loan for the maximum amount, Heiskell said, “This is a letter of credit. We can draw it all or as much as is needed.”
Those needs currently include repayment of a $300,000 loan from Erlanger Health System in Chattanooga and reimbursement of $4.2 million loaned by Regions, both of which were made in 2011. The bank’s loan was due this past January, but Regions is forgiving all penalties for late payment so long as its principal and interest are repaid.
That is what Tuesday’s agreement guarantees: the two creditors will be paid now and Rosemawr’s loan which is due on or before Dec. 31, 2015, at an interest rate of 4.5 percent. Repayment past the first of 2016 will be assessed interest of 6.5 percent per annum.
Immediately after publicly reading and affixing her signature to the loan agreement, paralegal Joanne DeFalco of McKenna Long & Aldridge carried that document to Atlanta for a final legal review.
Unless something unforeseen occurs in the interim, the county today can begin drawing on this letter of credit.
Meanwhile state Rep. Steve Tarvin of Chickamauga has yet to file a bill seeking to create a Public Facilities Authority for the county, which would allow the county to issue bonds — essentially borrow money — without voter approval. Tarvin has until Friday to file the bill.
Official aren’t saying how they plan to pay off the $4.5 million now owed to Rosemawr by the end of this year. The loan equals about one-fifth of the county government’s entire annual budget, which is about $22 million.