By Collin Brooks
Despite both Johnson City Mayor David Tomita and Washington County Mayor Dan Eldridge saying that both parties are willing participants in an inter-local agreement between the city and the county, that would allow the county to pay payments in lieu of a lump sum payment when borrowing money for schools, no action has been taken on the document by the city.
In fact, six months after the county passed resolution 16-06-13 in support of the 3-page inter-local agreement, it still hasn’t appeared before the city.
“Any thought that it has been purposely put on the back burner is just not correct,” said Johnson City Mayor David Tomita, who voted on the agreement as a Washington County Commissioner during the June meeting. “What was presented was just a pretty general agreement. What will ultimately be signed is a much more specific agreement. Right now, we don’t really have anything to consider.”
Tomita said that the city doesn’t know the terms, the amount and that there was nothing to fill in the blanks, but he said once those things are done it should makes its way to the city.
“As it comes together as a real agreement, instead of a concept, we are wide open to it, there is no push back on it as long as it is enforceable — and the bond council is looking at that now,” he said.
Eldridge agreed that there are still a few details that are being worked out, but those shouldn’t completely inhibit the city from passing the inter-local agreement. He also mentioned that he felt like this would be a one-time agreement, which would be project specific.
The agreement is “to make annual cash payments equivalent to the debt service payments that would have been made by the county for the city’s share of said bond or note proceeds,” according to the document.
By state law, the county must share a percentage of money they borrow defined by the state’s Basic Education Program enrollment numbers, which currently sits at 53 percent county and 47 percent city. That means for every $1 million borrowed by the county, they must borrow just under $1 million for the city to have.
This idea comes into play as the county looks at ways to finance the borrowing for the construction of the Boones Creek K-8 that is currently being designed by the Washington County Board of Education. Eldridge said that one low-interest and taxpayer friendly way to borrow that money would be a Rural Development Grant from the USDA.
Eldridge said that a Rural Development Grant from the USDA would have low interest and longer amortization. If the county went that route, the borrowed money operates as a construction loan for the first five years, which means the county would only draw down the money that they need for up to five years.
“It will save an enormous amount in interest,” Eldridge said. “The traditional bonds — going to the public bond market like we have always done — on day one you take down the entire amount of the borrowing and you start paying interest on it that day.”
Both sites — the proposed Jonesborough site, which sits next to the current Jonesborough Elementary School and is known as the McCoy property and the new Boones Creek K-8 site on Boones Creek Road and Highland Church Road — are prequalified by the USDA, according to Eldridge.
But without this agreement, the county wouldn’t be able to take advantage of the low-interest program, because the county couldn’t share the bond with the city because the cities money would be going to an area that would not qualify for rural development funding.
“Without the inter-local agreement it can’t happen,” Eldridge said. “Because the rural development financing is available to be used only in areas that qualify for the lending. Cities and municipalities over a certain population do not qualify.
“This financing structure is a unique opportunity to have some flexibility in how we approach this long term debt. It requires less from the taxpayers and can be paid off at any point in time,” Eldridge said, mentioning there is no pre-payment penalty like other bonds.
