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Erwin BMA hopes to find budget savings

Town officials discuss the hundreds of thousands of dollars that could potentially be saved through a refinancing offer with the Tennessee Municipal Bond Fund. (Erwin Record Staff Photo by Keeli Parkey)

By Kendal Groner

A refinancing offer presented to Town of Erwin officials in a budget workshop on July 12 showed a total of $316,750 in savings are available for next fiscal year, in addition to approximately $740,000 in new monies, locked in at a fixed interest rate.

Officials heard from Steve Queener from the Tennessee Municipal Bond Fund, who examined the town’s three current capital outlays which total $1,327,803.

“In this proposal, what we have done is extend those maturities a little,” Queener said. “If you choose to leave the maturities the same, that’s up to you.”

The town currently has an $800,000 note from 2012, which they still owe $350,000 on before it matures in 2022. Of a $1,125,000 note from 2013, the town still owes $657,803 before it matures in 2025. A total of $320,000 is still owed on a 2018 note in the amount of $350,000 that expires in 2028. Queener extended the 2012 note that matures in 2022 by another four years, and also extended the 2013 note that expires in 2025 by two more years. By extending the maturity dates, the town will not have to make a debt service payment of $80,000 that is due in June 2019 on the 2012 note, $93,750 due in September 2018 on the 2013 note and $35,000 due April 2019 on the 2018 note.

“That’s $208,750 that you would not be required to pay next fiscal year by us restructuring it into the fixed rate program,” Queener said.

Queener also went back and evaluated the $3.5 million note used for the town’s downtown revitalization projects and was able to waive and spread out the $108,000 payment due this year over the course of 11 years.

“If you want to shorten that 11 years and you want to pay it over the next five years, you can do that,” he said. “You just can’t take it and put it at the end.”

In addition to the $316,750 in savings Queener was able to offer on debt service payments, he was also able to offer $747,000 in new monies to be used for capital expenditures such as new fire trucks, police cars and long-term public works projects.

“Including that, that brings you a total of $2,074,803,” Queener said about the town’s total debt. “What we put together for you is a 15-year, fixed rate program at 3.95 percent for the full 15 years.” 

Town officials were also told by Queener last week that the new monies could be put on a draw program, meaning instead of paying interest on the entire $747,000, the town would only pay interest on the amount they draw as they complete various projects.

“I think the enhancement part of this, is it saves you a little money on your debt service this year so you don’t have to make any payments this year,” said Queener. “You will not have any payments until September 2019.”

Erwin City Recorder Glenn Rosenoff asked Queener if it would limit the town’s ability to make principal payments. Queener stated that if the town were to pay it off in the first eight years, there would be a 1-percent prepay penalty; however, after that, there would be no penalty and additional principal payments could be made at any time.

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Prior to hearing from Queener last week, Rosenoff said the town was currently at an 8.04 cent budget gap with revenues of approximately $6.6 million, and expenditures of approximately $6.7 million. However, just based on the $108,000 in savings on the $3.5 million note, he said that puts the town at a savings of 8.46 cents.

“Those savings look good for next year,” said Doris Hensley, Town of Erwin mayor. “I think that covers everything we ever wished for in the town.”

Alderman Mark Lafever cautioned that while the savings looked appealing, officials should consider the ramifications of incurring more debt service.

“We have to look at two or three years down the road…” Lafever said. “I know we’re freeing up a lot, but if this is going to stack up on the debt service to where in two years we’ll be looking at more issues, we need to be aware of that,” Lafever said.

Rosenoff agreed to formulate projections for the town’s total debt service over the next three years and compare it to the $557,199 of debt service the town currently has. Queener informed town officials that they were in “a little crunch time” in order to meet the Sept. 1 deadline for the outlay note extensions and stated that a resolution of support would need to be passed by the Erwin Board of Mayor and Alderman by the end of July.