GATESVILLE – Words of financial advice were heard here earlier this month.

At their first meeting of the new year, the Gates County Board of Commissioners scheduled a public hearing prior to moving forward with borrowing $1.5 million to build a new county library. The public hearing is required by the Local Government Commission in advance of a public body using taxpayer money to repay a loan.

But before the public weighed in once again on the pros and cons of building a new library, Commissioner John Hora made a lengthy presentation concerning the county’s long-term debt as well as making several suggestions on how the county can save money in repaying that debt.

Hora built his case on the county’s available fund balance ($2.6 million). He said that fund, along with combined General Fund balance (now at $3.86 million), has grown steadily since the 2009 revaluation, saying it was built on the backs of the taxpayers who “endured a 5.26 percent tax increase” that year (the largest, he claimed, in county history).

On the other hand, the county’s long term debt is being repaid over 15 to 30 years. In the meantime, the county’s fund balance is invested to produce financial gain, but the interest rate is low (less than 1 percent), while the loans are being repaid at a 4.5 percent interest rate.

“That doesn’t make any sense to me,” Hora said.

To further state his case, Hora said the county borrowed $30,546 for five years at 3.74 percent interest to purchase equipment for the Register of Deeds office.

“And we’ve got two plus million dollars in the bank,” stressed Hora. “Would you do that? If you go to a car place with two million dollars in your pocket and wanted to buy a car that cost $35,000, what would you do?”

Hora used the current loan repayments on the DSS building as an example of how the county can save money. He said that loan ($1.89 million at 4.25 percent interest over 30 years) would cost the county $1.485 million in interest.

“We can refinance (at a lower interest rate) and save money, but there are other ways to save as well,” Hora noted, saying that a $500,000 annual payment would save $697,000 in interest. “Even a $50,000 payment above what we’re required to do would save $96,000.”

“This is all about saving money, saving taxpayer money, and being wise in what you do,” he added.

County resident Dan Bazemore asked Hora to refigure the loan payments based more on today’s interest rate (an estimated two percent). That lower rate calculated a savings of $974,000 based on the same repayment schedule (now at 26 years).

“Why has it taken so long for someone to think about this,” quizzed Bazemore.

“I’ve been thinking about this for a long time, but I’m only one person,” Hora said.

“I can see the need to keep a good, healthy fund balance, but this is a no brainer to me (what you’re showing in interest savings),” Bazemore responded. “We can still keep our fund balance and still save a lot of money.”

“We’re about to venture on borrowing more money, $1.5 million (for the library),” Hora stated. “We did do something halfway smart by taking out a loan at 1.77 percent for five years rather than the 15 years that was proposed.”

Following his presentation, Hora motioned for the county to save money.

“All we have to do is write the check,” Hora said. “It’s just a stroke of the pen. I would like to see us make a pledge today to reduce our debt. I’d like to see us take a number out of fund balance and pay on this debt. You choose the number; I think a half-million dollars is workable, but I’m not going to hold that to anybody. Let’s be proactive; let’s be innovative.”

Hora’s colleagues were not in opposition to the idea.

“I paid off my home mortgage by paying over the normal monthly payment and that saved me some money personally; so I’m all for saving the taxpayers some money,” said Commissioner Kenneth Jernigan.

“I’m in favor of refinancing our debt,” Commissioner Jack Owens stated. “I do need to point out that when you see those big numbers, the $974,000 in savings, the reason that number is so big is that it’s on a 30-year schedule. I don’t want the public to be misled, that savings is there if we went the full 30 years on the loan, but there are savings to be had if we refinance.”

Owens said he was willing to make a motion to use some of the fund balance to lower the county’s debt, but to do it, “in a conservative manner.”

“We need to give charge to our county manager and our finance director and let them do the research on what the opportunities are for refinancing and what are the potential repercussions on using x number of dollars from the fund balance,” said Commissioner Henry Jordan. “I’m in agreement for refinancing; I’m in agreement for using some fund balance, but certainly I want to make sure of what the repercussions are in moving forward.”

“I have some mixed feelings on this,” board chairman Graham Twine said. “I agree with the refinancing; I’m concerned about using fund balance. Our fund balance was spent down to near nothing in 2008 and it has taken a while to build it back up. We need to keep a certain fund balance. I don’t want to see us writing a bunch of checks out of fund balance until we do some more research.”

Hora motioned to spend $100,000 towards the DSS loan within the next month.

“We can make a lump sum $100,000 payment towards that loan, but at the same time if we don’t put a cap on spending the savings we realize may be spent somewhere else,” Jordan noted. “I think we need to look at our options. What will be the affect of spending that $100,000?”

“Our net available fund balance grew by $277,000 as reported in the audit,” Hora observed. “You got two choices – do we keep padding our pockets or do we let our citizens see a reduction in the tax rate and let them save money.”

Jordan noted that a portion of the fund balance increase was tied to a one-time refund from the state on child support revenue.

“There are some good ideas on the table to reduce our debt, but I don’t think we need to jump right in too quickly without research and forethought,” he said.

“There are moving parts to this equation that may not be apparent; they need to be hashed out to make certain of the savings we may realize,” County Manager Toby Chappell said. “It’s a great idea to refinance; it may be a great thing to pay our debt down by using some lump sum, but to pull out an arbitrary number sitting at this table is not in the county’s best interest.”

“I don’t want to see us do something that will hamper our (DSS) revenue stream (state and federal funds),” Hora said. “However, I think you can look and see the magnitude of the savings will probably far outweigh any revenue stream.”

Hora then withdrew his motion based on figures provided by Gates County DSS Director Colleen Turner. He did ask Chappell to provide a monthly cash flow projection over the next 12 months.