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Town of Erwin BMA puts property tax increase on table

Town of Erwin officials hear from Steve Queener with the Tennessee Municipal Bond Fund, pictured third from left, during a budget workshop held Monday, July 2, where the topic of debt refinancing was discussed. (Erwin Record Staff Photo by Kendal Groner)

By Kendal Groner

During a budget workshop held on Monday, July 2, Town of Erwin officials discussed the town’s current debt service, a three-percent salary increase for employees and property owned by CSX that is currently for sale.

Steve Queener with the Tennessee Municipal Bond Fund (TMBF) attended the workshop to provide assistance to the town officials in their discussions on their current debt service and new needs they might have. The TMBF provides a capital outlay program, a fixed interest rate program and a variable interest rate program for cities in Tennessee.

“What we try to do is see if a city has a need and if their need fits one of those programs,” Queener said. “You guys have been loyal supporters of the bond fund for several years.”

Queener said the town currently has the original $2.68 million from November of 1995 and currently owes $793,000 at the current 2.39 percent interest rate. There was also another $1.3 million from 2009, with an outstanding debt of $1,021,00 and a current interest rate of 2.36 percent. The most recent was the $3.5 million borrowed in 2014 for renovations to downtown.

There is currently $3,098,000 in debt still owed on that loan, with a current interest rate of 2.71 percent.

“Those rates change each Wednesday,” Queener said. “With the fixed rate program, interest rates have gone up. The variable rate has went up some, but not as rapidly.”

Queener said many cities are starting to look toward the variable interest rates and on the $2.68 million loan, the town has paid a little over $1 million in interest, compared to the approximately $2 million they would have paid with the fixed rate program. For the $1.3 million loan, the town has paid $141,800 in interest, opposed to the $417,000 they would have paid with a fixed rate, for savings of $275,000. Finally, for the $3.5 million loan, the town has paid $154,134 in interest, as opposed to the $430,527 with the fixed rate program, a savings of $276,000.

“You’re probably looking at 3.25 to four percent today,” Queener said about the fixed rate program. “That’s just a guess … much more than the three figures I just gave you.”

Rosenoff asked if the town were to refinance, if they would be obligated to pay the principal payments during the next fiscal year, with the next payment coming up in September.

“If we got it closed out before then, it wouldn’t be a problem,” Queener said. “We’d be happy to shoot some numbers back at you.”

• • •

After figuring in new numbers, the Town of Erwin currently has proposed revenues of approximately $6.58 million for the 2018-19 fiscal year and approximately $6.62 in expenditures.

Changes from the previously balanced budget come from the addition of two new police officers into the budget and the lowering of expected Community Planning Transportation Grant Funds from $125,000 to $40,500 in grant revenues.

With these additions, the town would need a 3.49-cent property tax increase to balance the budget, Erwin City Recorder Glenn Rosenoff said Monday. Should the officials want to include a three-percent salary increase for employees, the town will need a 9.76-cent property tax increase to balance the budget; a four-percent raise would need a 11.17-cent property tax increase; and a five-percent raise would require a 12.58-cent property tax increase.

“If we redo the bond or refund, it’s going to change that debt service line item, so we’re still not seeing the end game yet,” said Town of Erwin Alderman Mark Lafever. “So, in my opinion, we need to be prepared for a small increase, but it still doesn’t reflect what we are going to be looking at once we decide what to do with the debt service.”

Rosenoff said if they went the route of refunding or refinancing, he didn’t anticipate that the total debt service of $557,198 would be drastically reduced.

“If we go this route and refund this, we will still have interest, but I don’t think the payments will be due until next fiscal year,” Erwin Mayor Doris Hensley said.

Hensley said she believed those savings would be enough to cover the three-percent raise and possibly a five-percent raise without having a major tax increase. She also stated that from previous fiscal years, it seems to work best if the town incrementally raises taxes instead of going several years without any increases and then having a large increase all at once.

“I think a little bit of an increase each year is better than one really big one,” Town of Erwin Alderman Gary Chandler said.

A general consensus was reached among the officials to include a three-percent salary raise  for the 2018-19 fiscal year.

• • •

Also during the workshop, the CSX-owned property up for sale where the Hoover dump site currently sits was also a topic of discussion.

“There was an industry about five years ago that wanted to buy the Morgan Insulation and they really got upset that we didn’t want them here because they were a sawmill,” Hensley said.

The same company has contacted CSX and offered to buy the eight-acre tract where the Hoover dump site sits.

“The county has first refusal because they are the ones leasing it,” said Hensley.

The county was offered the property at $25,000 an acre, for a total cost of $225,000, which includes the home of Unicoi County Little League. However, due to concerns of contamination, the Unicoi County Commission voted in its June 25 meeting to table discussions on the property purchase until it has been further inspected.

“I am proposing we buy the back four acres which is directly behind the Hoover property, which is going to be developed here very shortly for $100,000,” Hensley said. “We can let the county buy the trash site there and keep it.”

Hensley envisions the area as a potential site for a dog park and mentioned that it would be  prime location with adequate parking space. She also said that the noise and air pollution from a sawmill could impact the Erwin Linear Trail and potential developments.

“I’m afraid if the new developer finds out that there will be a sawmill right behind them that they will pull up their stakes and leave,” said Hensley.

Rosenoff said that he had already reached out to a CSX representative that has been speaking with the county and asked them to include the town in future negotiations and discussions. He said the Town of Erwin Planning Commission does have a rule for an industry such as a sawmill in terms of regulating noise or other pollutions.

“I think part of the conversation about the four acres, when we negotiate that, they should understand that we deserve and need that Little League field,” said Lafever

“There’s a lot of kids around here that benefit from it,” added Fire Chief Darren Bailey.

Hensley expressed concerns as to whether or not the railroad would even entertain negotiations with the town since they are already involved in discussions with the county.

“If the county says no (on purchasing the property), then where does that leave us?” she asked.

Lafever expressed similar concerns to Unicoi County Commissioner Kenneth Garland regarding the history of the property and potential contamination. Hensley said she had spoken with Gary Tysinger, project manager with Tysinger, Hampton & Partners, Inc., who told her there was no contamination on the property.

“I know Kenneth Garland said differently,” she said. “Even if there was spillage down there, we won’t be building on it.”

A general consensus was reached during the meeting for the town to engage in discussions with the county regarding the property. Hensley entertained the idea that if negotiations prove unsuccessful and the county votes to not purchase the property, that the town could possibly purchase all eight acres if given the same offer and then lease a portion of the property back to the county.

On Monday, July 9, at 3 p.m., the Town of Erwin will host another budget workshop to further discuss debt service and refinancing options.