County officials are planning to borrow several million dollars, but the amount and the projects it will be spent on won’t be finalized until the Brown County Commissioners and Brown County Council meet on June 4.
At the May 21 council meeting, Jason Semler with accounting firm Umbaugh & Associates presented a plan to borrow $3 million and repay that amount over six-and-a-half years through property taxes.
Taking out a $2 million capital improvement loan was discussed last fall, but it wasn’t acted on. At that time, the projects on the list were overhauling the countywide public safety radio service to address “holes” in coverage for police, ambulance and fire workers; replacing the bleachers at the Brown County 4-H Fairgrounds and making them compliant with the Americans with Disabilities Act; and replacing wooden light poles that are in disrepair at Deer Run Park.
Semler said that Umbaugh had initially checked into the county borrowing $2 million, but the commissioners then requested to run numbers on borrowing $3 million due to additional projects being brought before them.
“The extra million was proposed for what, and what do we do with that in the meantime?” council member Darren Byrd asked.
Commissioners Jerry Pittman and Dave Anderson were in the audience, but they did not explain what the proposed projects were this time around or the reason for the $3 million loan instead of $2 million. Commissioner Diana Biddle was not present.
Baker asked for a joint meeting with commissioners to find out exactly which projects were being considered.
“I am not going to pay for anything that we don’t have a project identified for. I understand that it’s cheaper to borrow $3 million and stick out to six years instead of two, but I am not going to do that on my watch, I’m sorry,” council President Keith Baker said.
“You guys have done great work and that’s wonderful, but I want to wait a week or two until we sit down with the commissioners and get this figured out, exactly what the project list is and what it’s going to cost.”
Last September, Sheriff Scott Southerland estimated that the public safety radio project would cost at least $500,000 to $600,000, but he thought some grant funding might be available.
The county’s general fund has enough money in it to pay for bleacher repairs. At the May 21 meeting, the council decided to seek permission to move $100,000 from that fund to pay for repairs before the fair this summer instead of waiting to pay for them with a possible bond.
“Evidently it’s so unsafe that the insurance company is not sure they want to cover us for the 4-H fair,” Baker said.
The fair board received three estimates from the only contractors in Indiana who construct bleachers. The lowest figure was $96,000 to $97,000, Baker said.
Umbaugh said that if the loan happens, the county can be reimbursed for the bleachers expenditure, Baker said.
According to notes in a timeline provided by law firm Barnes & Thornburg LLP, the project to be funded with this loan is “not a controlled project for purposes of petition/remonstrance or referendum requirements.” Government borrowing over $2 million can trigger a taxpayer remonstrance, which can prevent governments from moving forward with their plans.
What about a justice center?
Earlier this month, consultants from architecture/engineering firm DLZ pitched a major project to county officials that’s estimated to cost more than $10 million over the life of the loan.
DLZ suggested building a new justice center next to the Brown County sheriff’s department and moving court offices there. Then, some county employees would move into the historic courthouse downtown after it is renovated.
The proposed 26,910-square-foot justice center is estimated to cost between $6,750,000 and $7,250,000, along with 25 to 30 percent additional for “soft costs” like professional and financing fees.
The total cost for that project, including capitalized interest through Jan. 1, 2021, is $10,105,000, Semler said.
Umbaugh’s estimate for the justice center did not include the costs to renovate the courthouse. Those are to be explained at DLZ’s final presentation to the council and commissioners on June 4.
Semler said the county could still do the justice center project if it formed a separate corporation, like it did for the Maple Leaf Performing Arts Center project and for the Brown County jail.
“Because that’s over your $8 million general obligation debt limit, if you decide to go forward with that (justice center) project, we definitely have to do a lease financing. That is similar to what we did for Maple Leaf. Many large projects are outside debt limits,” Semler said.
What’s the tax impact?
According to Umbaugh’s report, paying a $3 million bond back over six-and-a-half years would keep property tax rates consistent.
A $2 million road loan that the county took out in 2016 will be paid off at the beginning of 2019.
Brown County’s debt limit is $8.4 million, according to Umbaugh’s report.
The county has about $1 million more to pay on the road loan. Taking that debt into consideration, the county’s available general obligation debt limit is $7,471,631.
Semler said that doing a $3 million bond instead of a $2 million bond would prevent the county from having to come back in two to three years to borrow another million for other future projects.
“It would cut back on issuance costs. Right now, rates are at historical lows,” he said.
After administrative costs are subtracted, $2,845,000 would be available to the county out of that borrowed money to use on projects.
Bonds taken that were out to fund the Brown County jail will be paid off at the beginning of 2030.
If the county takes out this $3 million bond as well as a bond to fund the justice center, then the annual payment for 2018 would be $1,598,371 including the current jail bond payments.
In 2020, when the $2 million road loan is paid off, Semler said the county would pay $900,000 toward the 2018 bonds to keep the 11-cent tax rate level.
Umbaugh estimated that in 2021, the bonds for the justice center would start being repaid, so the payment toward the 2018 bonds would go back down to about $500,000.
“That, again, keeps your annual payment to about $1,450,000 ($1,466,413) and keeps your tax rate below that 11 cents per year,” he said. “The reason we’re going out five or six years instead of paying back in two or three (years) is trying to keep that tax rate level and not show an increase.”
A preliminary timetable and checklist provided by the county’s law form had the council passing the preliminary bond resolution and introducing a bond and appropriation ordinance on May 21.
Toward the end of the discussion, Baker said that taking out the $3 million without knowing what exactly it will be spent on is “too critical of an issue for me.” He said he didn’t want to delay the preliminary schedule too long and suggested meeting with the commissioners as soon as possible.
“I want to see what these projects are,” he said.
“I think this is a great deal. The question to me is, how much money? … It’s important for me to have a better handle on it. I am not comfortable with this.”
Byrd agreed.
“It’s too easy to spend money to begin with, then get extra money and try to find something to spend it on,” he said.
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What: Joint meeting of Brown County Commissioners and Brown County Council to discuss projects to be funded with a possible $3 million bond.
When: June 4 at 5 p.m.
Where: Salmon Room in the Brown County Office Building, 201 Locust Lane
This meeting will be followed by a DLZ presentation at 6 p.m. about their final study on building a new justice center and refurbishing the current Brown County Courthouse.
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