In previous posts, audit documents have shown that the county borrowed $40 Million between 1998 and 2001 and still owed the full $40 Million as of 2007 and 2008. In addition, the county borrowed $28 Million for MH Hospital and those payments have also been---drum roll, please---interest-only!
Joe Ayres of Cumberland Securities set Hamblen County up with interest-only debt back during the 1998 school building program. County Mayor David Purkey, who also refers to himself as the county's Chief Financial Officer, and several current commissioners--Larry Baker, Guy Collins, Stancil Ford, Doyle Fullington, Herbert Harville, and Joe Spoone--were involved with the 1998 debt set-up.
Recently, conflicts of interest have finally caught up with Joe Ayres/Cumberland Securities/Morgan Keegan and TNLoans (another Joe Ayres entity). See my previous post and read the NY Times article.
Being aware of the county's ever-increasing debt problems, on April 13 I requested complete debt information from the Mayor's Office on the refinancing deals that the Mayor and Finance Director worked out with Joe Ayres in the summer/fall of 2008.Just a short ten days later (April 23) County Mayor David Purkey invited the school board to join the county commission on May 12, 2009, in the large courtroom at the courthouse where an "objective appraisal" of the county's debt will be presented. In other words, Joe Ayres probably won't be there.
The Mayor described the May 12 meeting in this way: The UT County Technical Assistance Service (CTAS) will present a final report of a detailed status of the County's debt and potential for additional debt needs. This objective appraisal of our debt situation has been long awaited and should provide the foundation for future discussions.
"Long awaited"? That's a major understatement! It's "long awaited" because the Mayor apparently before never asked for an "objective appraisal" of the county's debt from a disinterested party. Joe Ayres certainly can't be considered an independent financial advisor when he and the many companies with whom he is affiliated (Morgan Keegan/Cumberland Securities/TNLoans) profit from both the size and structure (interest-only) of the county's debt.
Fox guarding the henhouse? Absolutely. Conflicts of interest? Everywhere. Objective financial advisor? No way.
Interestingly, CTAS is encouraging counties to use RFP's (Request for Proposals) when issuing new debt. An RFP asks several firms to present what they have to offer a county instead of automatically going with Joe Ayres or anyone else.
[Using a Request for Proposals process for financial services is the very same thing I finally got the county to do in 2006 for architectural/engineering services. An RFP opens up the process for several companies to offer their services. Most people "shop around" when there is a major expenditure. A Request for Proposals is one way a county can "shop around" to get the best financial product/service at the best value for the taxpayers.]
And the City of Morristown ought to be doing the same thing---getting an "objective appraisal" of its debt and using RFP's when it seeks independent financial advice or issues additional debt.
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