A shortage of time — and money — forced commissioner Bebe Heiskell on Tuesday to take out a short-term loan in order to make good on about $4.5 million of Walker County’s financial obligations regarding Hutcheson hospital.
“These are the only county-secured amounts that are owed,” Heiskell said Wednesday afternoon. “If I didn’t think we could repay the loan, I wouldn’t have done it nor would they have lent us the money.”
Creditors were demanding repayment of loans — $4.2 million from Regions and $300,000 from Erlanger — made in 2011 when Hutcheson needed a infusion of cash to cover payroll and operational expenses.
Legislative action postponed
To meet that need the county had asked that state Rep. Steve Tarvin of Chickamauga to introduce a bill during this legislative session allowing creation of a public facilities authority. Such an authority, if approved by state lawmakers, could have issued bonds to cover the hospital’s debt and ongoing expenses.
Tarvin, during a telephone interview the last week of February, said this was a very complicated issue, but one that could transfer short-term debt to a long-term solution.
“We need to go into something like this with our eyes wide open,” Tarvin said. “I want the citizens to rest assured that Steve Tarvin will do nothing to put the people of Walker County any further in debt.”
During a follow-up interview on Wednesday morning, March 11, Tarvin said he told Heiskell that he would not present the bill. Instead, he said he was willing to introduce legislation that “would have allowed a referendum on the ballot, something that would let people vote to support bonds to move debt from short-term to long-term.
“This is nothing against the commissioner. I just don’t feel comfortable giving unelected people the authority to put the citizens of this county in debt.”
Heiskell cited the county’s economic development authority which has operated for years without reporting monetary losses and which can show industrial development projects — such as that of Euclid Chemical, Nissin Brake, Phillips Bros., and, most recently, Audia International — which have brought jobs to Walker County.
Borrowing to repay previous loans
When Heiskell proposed Tarvin’s introducing legislation to allow a new authority with the ability to issue and repay bonds with income from Hutcheson’s ongoing operations, the commissioner said it would be less painful to taxpayers’ pocketbooks because it would spread debt payback over a period of time.
For an individual, that could be compared to securing a home equity line of credit, instead of a payday loan, to finance remodeling or tuition expenses.
With a legislative solution out of the question, Heiskell this week put pen to paper and borrowed money, available now, that will be repaid with taxes to be collected the remainder of 2015.
Rosemawr Municipal Partners, part of a New York-based hedge fund specializing in municipal credit instruments, made the loan by extending a $10 million letter of credit. Only the amount actually used must be repaid by year’s end.
“I had every hope of our assistance helping Hutcheson stay open,” Heiskell said regarding the county’s financial support of the hospital. That support came in the form of loans issued Hutcheson and guaranteed by Catoosa and Walker county governments.
The counties supported the local hospital because it provides jobs, directly and indirectly, and meets critical health-care needs for northwest Georgia. The hospital benefited from the counties’ support because lending rates are much better for governments than for individuals or businesses because governments can raise taxes to cover financial obligations.
Though not her preferred means to pay the $4.2 million due since New Years Day, the commissioner said she is confident that loans will be repaid and the hospital can remain solvent.
She said there is always the possibility of selling county-owned assets to recoup some of the costs, but having paid overdue bills allows the breathing room to better assess what lies ahead.
Playing it close to the vest
Walker County attorney Don Oliver said numerous options for long-term financing of the hospital are being pursued, but it would be premature to publicly talk about — and might possibly undermine — solutions.
“The hospital continues to improve and should progress to some point where they will be able to reaffirm their own debts,” he said. “ The county is doing our citizens a favor in buying time to allow that to happen.”
Heiskell noted that while both Catoosa and Walker counties pledged equal amounts to meet Hutcheson’s immediate needs, their ability to repay those guarantees is unequal.
“The biggest difference in the two counties’ abilities to pay their obligations is due to Catoosa collecting nearly three times as much in sales tax revenue as we do,” Heiskell said.
Catoosa County closed the books on its 2014 fiscal year with a surplus of $1.4 million. That money, combined with money from the county’s reserve fund, allowed Catoosa County to repay its share of Regions and Erlanger loans while leaving more than $10 million in its reserve account.
The neighboring county’s reserves continue to grow as it continues to grow into a major retail destination for much of northwest Georgia and southeast Tennessee.
“Where we collect about $5 million in LOST (local option sales tax) revenue, they collect $13 million — and their retail base continues growing,” Heiskell said. “Our citizens make their money at jobs in Walker County but don’t spend it here.”
Rosemawr’s willingness to finance repayment of Walker County’s $4.2 million in short term, but overdue, obligations allows authorities to shift into “the mode of seeking long term solutions,” Oliver said.
This is the notice published in the Feb. 25, 2015, edition of the Walker County Messenger concerning Steve Tarvin’s intention to introduce legislation that would have made long-term financing of Walker County gov-ernment’s financial obligations regarding Hutcheson hospital.
NOTICE OF INTENTION TO INTRODUCE LOCAL LEGISLATION: Notice is given that there will be intro-duced at the regular 2015 session of the General Assembly of Georgia a bill to create the Walker County Public Facilities Authority; to provide for a short title; to provide for definitions; to provide for purpose; to provide for powers; to provide for the membership of the authority and their terms of office, qualifications, and compensation; to provide for the issuance and sale of revenue bonds and other obligations; to provide that such revenue bonds and other obligations are not general obligations; to provide for trust indentures; to provide for the security for such revenue bonds and other obligations; to provide for refunding revenue bonds and other obligations; to provide for a principal office; to provide for validation; to provide for no im-pairment of rights; to provide for trust funds and investments; to provide for the power to set rates, fees, and charges; to provide for exemptions from taxation; to provide for tort immunity; to provide for exemptions from levy and sale; to provide for area of operation; to provide for supplemental powers; to provide for no power to impose taxes or exercise the power of eminent domain; to provide for the conveyance of property upon dissolution; to provide for liberal construction; to provide for severability; to provide for an effective date; to provide for related matters; and for other purposes.
Signed: Representative Steve Tarvin, District 2
When a state, city, hospital or any other party issues a bond, the issuer expects to pay back the borrowed money at some point in the future. The issuer guarantees repayment of the money in one of two basic ways: general obligation bonds or revenue bonds.
General obligation bonds can be repaid by means of taxation. Examples of general obligation bonds would be the various optional sales tax-supported bonds (SPLOST, LOST, ESPLOST) that fund capital projects.
Revenue bonds are repaid with proceeds collected from the project that the bond finances. Examples of revenue bond-funded projects are utility upgrades, like water and sewer projects, that are repaid by collecting user fees.