Friday, May 29, 2009
His budget and his planned presentation were derailed two days before by the action of commission's budget committee on Tuesday, moving 8-cents of the school's property tax revenue to debt service earmarked/reserved for school repairs or building program use.
At the start, Lynch mentioned an e-mail that some unnamed individual had sent him telling him that 8-cents of the school's property tax was taken from the schools and put into debt service. He never said who sent him the e-mail.
Lynch said if the 8-cents is not in the general school budget, then the school budget is now out of balance by about $925,000.
Referring to the sales tax, Lynch said that it "troubles me" that we worked together to pass the sales tax and then to see this re-structuring of the property tax. Later in the meeting, Commissioner Ford clarified that the sales tax is still going to the schools and that 8-cents of property tax is not being taken from the schools but is being put into debt service as a reserve for the schools maintenance and building needs.
Lynch said we were not asking for additional local funding, the only funding over the last three years from this body has been growth money.
Lynch then discussed the new Stimulus Money of $1,366,004 for Title IA with $618,751 to be spent in 09-10 school year; and $747,253 to be spent in 10-11 school year.
Title IID Stimulus Money of $51,957 to be spent in 09-10.
Title X Stimulus Money of $60,319 with $32,319 to be spent in 09-10 and $28,000 to be spent in 10-11
IDEA Stimulus Funds if $2,312,684 to be spent by 9/30/11.
Stancil Ford asked what happens to the new positions funded by stimulus money when that money is gone.
Lynch replied that "In two years those positions will go away." He added that we know that there is no way that the State of Tennessee or local government will pick up these positions. But the equipment we can keep.
Then they started discussing the sales tax revenues again.
Lynch: Not a person here had that discussion with me (using the sales tax money for the building program).
Lynch: We committed to pay $500,000 per year to debt service for 28 years on the last building program (the $35 Million 1998 building program). We will pay $14,000,000 on that $35,000,000 construction. [Dr. Lynch apparently hasn't looked at the county audit for 2008 or he would know that the $6,000,000 that the School Board has paid thus far has not been applied to the $35,000,000 of construction costs. The school board's payments and the county's payments have been used to make interest-only payments. As of 6/30/08 --nearly 10 years after the construction started--the WHOLE $35,000,000 is still owed.]
Lynch: We are proud of East High. It has major problems, but we maintain it. What we haven't done is put a roof on East High. We need a roof and other repairs.
Commissioner Alvis: To me it's a good investment to put a roof on it. It's going to be used.
Lynch: Why would we want to put a roof on the old 1923 building and then tear it down? When we have leaks, we are fixing them. The roof is bad in the whole structure.
Alvis: I know we are going to be using that building longer than we thought.
Commissioner Tommy Massey: We don't know what sales tax [will come in]. Unemployment in Hamblen County is one of the highest in East Tennessee. Other departments in the county have not asked for any raises.
Ricky Bruce, who was not at the last budget meeting, then decided to talk about "cost drivers" for the schools such as electricity, gas, insurance, etc.
Lynch said the schools/taxpayers pay the full health insurance premium (100%) for a teacher with single coverage. Lynch said the schools/taxpayers cover about 70% of the family health insurance premium.
Ricky Bruce made a motion to take 4-cents from the school property tax rate to be put into debt service for school construction and let the schools keep the other 4-cents + all the sales tax money.
Dennis Alvis seconded the motion.
The vote was 2 in favor of this motion (Ricky Bruce and Dennis Alvis).
10 against (Larry Baker, Guy Collins, Stancil Ford, Doyle Fullington, Herbert Harville, Doe Jarvis, Paul Lebel, Tommy Massey, Joe Spoone, and Dana Wampler.
Nancy Phillips and Reece Sexton were absent.
Stancil Ford then asked when the School Board could come back with their revised budget. Dr. Lynch said he'd have to check with the Board. Stancil asked School Board Chairman Janice if the Board come have the revisions by Tuesday, June 2. She said several board members were on vacation.
Of course, Haun was already ticked off as she had earlier asked the commission AGAIN to go on and buy the McCorkle property. She said the option was expiring.
Commissioner Lebel told her that nobody is going to buy that. "It's a rock pile."
Haun said it would be better stewardship of money (to buy the property).
Commissioner Spoone then said that "this county can not afford an $80 Million building program. We need to do what we can do." It may be 5 years or it may be 10 years before we can build.
The meeting adjourned.
Wednesday, May 27, 2009
May 27, 2009 Commissioners Give Extra Sales Tax Money To Schools and Take Away School Property Tax Money for Building Program Debt Reserve
Herbert Harville made the motion which gives money to the schools with one hand (sales tax revenues) and takes away the same amount of money from the schools with the other hand (school property tax rate reduction) and places the money taken away into a reserve debt account for school repairs and school capital improvements.
In prior statements and at yesterday's commission meeting, Herbert Harville said that he had encouraged voters to vote "yes" on the May 5 sales tax referendum teling them that the sales tax revenues would be used for the school building program. There was extended discussion on what the school board had said would be done with any extra money.
[Of course, if Herbert read the front-page of the local newspaper on April 19--over two weeks before the May 5 referendum--he would have seen that Director of Schools Dale Lynch described a lot of things that the schools "could" do with one million dollars but Lynch did not say that the money would be dedicated solely to the school building program. Click here for my post on what Lynch said "could" be done with any extra sales tax revenue.]
Herbert pointed out to commissioners that the school board had plugged the new sales tax revenues into the regular school operating budget to spend in the next school year.
Hamblen County Commissioners--at least the 10 who were present yesterday--voted unanimously to take back 8-cents of the school property tax rate and place it in a reserve debt fund for school improvements.
Commissioners voting for Herbert Harville's motion were: Dennis Alvis, Larry Baker, Guy Collins, Stancil Ford, Doyle Fullington, Herbert Harville, Doe Jarvis, Paul Lebel, Tommy Massey, and Dana Wampler.
Not attending the budget meeting were: Ricky Bruce, Nancy Phillips, Reece Sexton, and Joe Spoone.
The effect of Herbert's proposal is to keep the county's maintenance of effort (the county's required contribution to the schools) at the same level as in past years and at the same time to make sure that there is money set aside for needed work at East High. The commission discussed at great length the roof and other problems at East High and the way that the School Board has allowed East High to deteriorate while at the same time just recently purchasing additional property adjacent to the school.
The funny thing was to hear the commissioners "wondering" why the school board was buying property around East High and "wondering" why the school board had not put a roof on East High over the past years and "wondering" what the school board's maintenance plan was and "wondering" where the school board's roof consultant was.
The speculation about what the school board is doing, is not doing, and is thinking of doing is funny only because the school board members are not some extra-terrestrials on another planet.
Why are commissioners "wondering" what's going on with East High. Pick up the phone and call Dr. Lynch, School Board Chairman Janice Haun, or another school board member and find out what the school board is doing and plans to do with taxpayer money.
Monday, May 25, 2009
MEMORIAL DAY 2009
In honor and in remembrance of those who serve and have served in the armed forces of the United States of America.
In Flanders Fields
By: Lieutenant Colonel John McCrae, MD (1872-1918) Canadian Army
In Flanders Fields the poppies blow
Between the crosses row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.
We are the Dead.
Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie in Flanders fields.
Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow In Flanders fields.
Saturday, May 23, 2009
May 23, 2009 Tribune, Friday, May 22: Why No News Coverage of City Council's Thursday Budget Meeting?
After I got home from work yesterday, I was reading the paper, but I didn't see a word about the meeting even though the Trib's city reporter Bob Moore was at the meeting. It was odd not to see any news about the Thursday meeting in the Friday edition of the "news"paper--especially since the Thursday meeting ended early.
Perhaps there will be a lot of "news" about this meeting in the Sunday Tribune.
Maybe Sunday will be the start of a series of articles on the city budget and how City Administrator Jim Crumley is suffering along with everyone else as he gives up his taxpayer-funded Morristown Country Club membership and a little bit of the car allowance increase that he negotiated for himself and several buds a couple of years ago--supposedly after private discussions with former Mayor Gary Johnson.
Remember the property tax increase and the sales tax increase and all the talk of "bare-bones budgets" in past years? Those "bare-bones budgets" apparently had enough money in them to pay for Crumley's Country Club membership. And car allowances and travel and food and cell phones everywhere.
Wonder what else is still in the budget that hasn't been discussed? A line-item detailed review is needed. CITY AND COUNTY.
[UPDATE Monday, May 25, 2009. Three editions of the Tribune "news"paper have come out after the May 21 Morristown City Council budget meeting, and still the Tribune has no "news" article about Crumley's suggested budget cuts or the reaction of the councilmembers to his proposals. Maybe Tribune reporter Bob Moore just came to the meeting and got copies of all the budget handouts for the fun of it and decided not to report anything. What a shame.]
May 23, 2009 McGuffin Asks Whether Crumley's Moratorium on Providing City Garbage Cans To City Businesses Is Legal
Of course, if businesses had to contract for private sanitation service, one of the largest beneficiaries of such a move would be Tidi-Waste, a commercial garbage service owned by councilman Frank McGuffin's family. [At the meeting, McGuffin acknowledged that several businesses have already cancelled commercial contracts and have apparently requested multiple city garbage cans instead.]
While there was no support for eliminating all commercial garbage collection from the other four councilmembers, City Administrator Jim Crumley instituted a moratorium on future business requests for garbage cans, stating that he (Crumley) would not honor any future request by a business for multiple cans.
On Thursday, May 21, the council met again to discuss the budget. Councilman Frank McGuffin asked about Crumley's moratorium and questioned the legality of this action. Crumley stated that refusing to honor new requests for multiple cans would be legal since it would just be a new city "policy." McGuffin said it might be viewed as discriminatory and that the city attorney should look at this.
[McGuffin is related to City Attorney Dick Jessee so Frank may have some inside legal info on this issue. Frank is either truly concerned about the discriminatory nature of the new Crumley/City policy, or Frank may be thinking that if the Crumley/City policy is determined to be illegal, then councilmembers might go back and again consider ending ALL commercial pick-up, which, of course, would benefit Tidi-Waste.]
Ignoring Frank's motives, it would seem that one commercial business should not be treated differently from another similarly situated commercial business in regard to provision of city services. Any city policy should treat all businesses fairly and equitably and should not unfairly discriminate between businesses.
City revenues are used to provide sanitation services (cans and curbside pick-up). There are policies for different groups (residential, commercial, etc.), but these policies should be fair and equitable for each group. You can't have a policy for residences that says that the city will pick-up garbage at residences except for those that have a brick veneer. Wonder if Crumley also thinks that you could have a new "policy" that refuses to give garbage cans to new residences?
As Frank mentioned, Crumley's refusal to give city garbage cans to a business that requests them after May 21, 2009, could be seen as discriminatory. What Crumley is instituting is a policy that discriminates against one business and favors another similarly situated business.
Crumley seems to think that if it's a "city policy," it's automatically good to go. End of discussion. Frank seems to think, and I would agree, that the city policy has to be legal and non-discriminatory.
Another way to look at this would be to imagine that there are two companies in the same type of business located side-by-side on Main Street. They both pay property taxes, personal property taxes, business taxes, permits and licensing fees, and on and on.
Business Owner #1 has used city garbage cans for 5 years. Business Owner #2 has used a dumpster for 5 years but has now decided to use city garbage cans just like his neighbor business. Business Owner #2 calls up Jim Crumley and asks for the same number of garbage cans that Business Owner #1 has. Crumley says "no" and adds that there is a new city policy (as of May 19) that multiple garbage cans will no longer be provided to businesses that request them.
How can you tell one commercial/business/taxpayer that his taxes include a garbage can and garbage pick-up and then tell another commercial/ business/taxpayer right next door that HIS taxes do NOT include a garbage can and garbage pick-up?
No doubt the city attorney will be called on to look at this new Crumley policy. There are really two questions here. One is legal. One has to do with good policy.
If the city attorney determines that Crumley's policy is not legal, that will probably be the end of it.
But, if the city attorney somehow finds that this particular discrimination is technically "legal," then the councilmembers would still need to ask themselves whether they really want to establish or allow the City Administrator to establish a policy that treats one city business owner/taxpayer differently from another city business owner/taxpayer?
Friday, May 22, 2009
Yesterday's meeting would have been over in record time except that a beer permit was on the agenda.
The owners of Ridgewood Market at 2875 Reeds Chapel Road applied for a beer permit. A neighbor who lives within 300' of the market appeared to object to the permit.
[The county apparently passed a resolution many years ago stating that if a resident who lives within 300' of the proposed location where beer is to be sold comes to a meeting where the beer permit is to be considered and objects then the permit will be denied. During the discussion, I believe it was stated that a beer permit was requested for this same location in 2000, an objection was raised by the same neighbor, and the permit was denied at that time. It is my understanding that the county attorney stated during the meeting that the commission "could" go ahead and grant the permit and that would have the effect of voiding the prior resolution. But the attorney recommended that the county review its beer guidelines first and then re-visit this issue.]
Paul Lebel implied that allowing one person to stop the permitting process was un-American and that 300' was an arbitrary distance requirement.
The neighbor who objected to the permit--Mr. Livesay --took exception to Lebel's "un-American" comment and stated that Mr. Lebel had a right to his opinion and that he (Mr. Livesay) had a right to his opinion as well. Mr. Livesay was asked the basis for his objection. He stated that years ago when beer was sold at that location there had been drinking and noise at 1 am and 2 am in the mornings and trash thrown about. [Since beer has not been sold at the location for a lengthy period of time, there is not a grandfathering of that old permit.]
The couple seeking the permit said that there would not be a lot of loud drinking in the parking lot and that they needed the permit for extra revenue.
Joe Spoone moved to table the issue and consider it further in committee but no action was taken on tabling.
Paul Lebel made a motion to go on and approve the permit despite the recommendation from the county attorney and several commissioners that the county's beer permit rule be reviewed first and then the market owners could re-apply under any newly-adopted distance or objection rules.
Voting FOR going on and approving the permit were Larry Baker, newly-appointed commissioner Doe Jarvis, Paul Lebel, and Nancy Phillips.
Voting AGAINST were Dennis Alvis, Guy Collins, Stancil Ford, Doyle Fullington, Herbert Harville, Tommy Massey, and Reece Sexton.
ABSTAINING was Joe Spoone.
ABSENT were Dana Wampler and Ricky Bruce.
If I had to guess, the current Hamblen County beer permit rules and guidelines will probably go to a committee for review.
Ernie Horner--as I posted yesterday morning--decided to withdraw from contention for appointment. My earlier post describing some of Ernie Horner's political connections and actions is here.
[This is the seat vacated in April 2009 by Joe Swann who only served 2-1/2 years on the Hamblen County Commission before resigning to take a position on the Hamblen County Election Commission.]
May 22, 2009 City Administrator Jim Crumley Finds $1,794,300 To Cut in City Budget (Including His Taxpayer-Funded Country Club Membership)
The summary sheets passed out list the cuts as follows:
All Departments 130,000
Human Resources 26,000
Parks and Rec 49,000
Public Works 290,000
Personnel "cuts" include 16 positions:
4 fire positions (1 from each shift) as well as the assistant fire marshal position.
4 police positions
4 public works positions
2 parks and recreation positions
2 city hall positions
But no one is losing a job. The positions that are being "cut" are positions that are NOT filled right now anyway or the position is being cut and the individual is being transferred to another department where there is a vacancy.
The city administrator also passed out a "staffing" sheet yesterday showing city employee levels for 2001, 2009, and proposed 2010.
2001: 270 employees
2009: 328 employees
2010: 309 employees
Some examples of the cuts as stated by the City Administrator:
16 positions are not being filled or employee is transferred to another department with an opening, a savings of $868,000.
Curbside recycling will be replaced with convenience center drop-off locations saving $150,000.
One knuckleboom route will be eliminated with a savings of $85,000
Clothing allowance is being reduced 50% from $20,000 down to $10,000.
33% cut to car allowances: Car allowances apparently were $84,000 per year and are now being reduced to $56,000 per year (a cut of $28,000)
Holiday pay is being cut from $240,000/year to $120,000/year.
Cell phones are being "reduced" with a cut of $40,000.
Travel is being cut by 50% with a reduction and savings of $90,000. [As one councilmember noted, this meant that out-of-town travel had been running at $180,000/year. If that is the case, then "travel" had been chugging along at about $15,000/month!]
Mayor Barile's recently formed diversity task force was reduced by $7,000.
Armored car service was eliminated, saving $5,600. Apparently now an on-duty policeman will take care of delivering checks/cash to the banks.
Bottled water/coffee service was eliminated with a cut of $10,000.
And the City Administrator's Country Club membership was cut with a savings of $2,500!
You know things are dire when the City Administrator feels the pain and gives up his country club membership!
Thursday, May 21, 2009
See my previous post about Horner here when he was still in the race and trying to get votes.
Wednesday, May 20, 2009
I do not post anonymous comments or comments from sources that I can not identify. However, I do understand that occasionally there are valid reasons that someone does not want to use his/her real name on a comment, Therefore, I will protect the identity of those who have a reason to comment anonymously IF I have first confirmed the real identity of the commenter.
So...if you want your comment posted, make the comment and then send me a separate e-mail (email@example.com) with your name and phone number so I can verify the source of the comment. Then if you have a concern about your real name being attached to your comment, you can let me know and we can discuss whether to post your comment as "anonymous" or with a made-up name.
Thanks for reading. Thanks for commenting.
Tuesday, May 19, 2009
[Swann was elected to the county commission in 2006 but resigned in April 2009 to take a position on the Hamblen County Election Commission---a post he said that he had always wanted. ]
At least two individuals have apparently expressed an interest in the appointment to take Joe's place. Louis "Doe" (sp?) Jarvis is interested in the position as is Ernie Horner. I don't believe Mr. Jarvis has ever run for office---which should be a plus.
Ernie Horner, on the other hand, is a politician and longtime school board member. He was chairman of the Hamblen County School Board during the last school building program. As a teacher at West View Middle in an "open" classroom, I supported school renovations and improvements in 1997-1998.
The problems in the building program that surfaced later were brought about by a school board that took $35 million dollars for a needed building program and wrote up contracts that permitted conflicts of interest, that wasted money paying people to manage themselves, and that even paid the construction managers "fee on fees." While my support of the building program was well-documented, I spoke up to oppose the conflicts of interest and fees on dees and that's when the personal attacks began.
When you are confident in what you are doing, political and even personal attacks don't matter much and don't really faze you. I started out trying to use logic and common sense with the local school board. That was a waste of time. When that didn't work, I went straight to the State Comptroller and ended up getting state law changed to address the conflicts and craziness of paying people to manage themselves.
Yes, I remember several things about Ernie and the 1998 school building program.
I remember that Ernie didn't see a conflict of interest in paying someone under one a construction contract to build a school and then paying them a second time under a construction management contract to manage their own construction work.
Ernie also thought it was OK to pay a construction manager a 4% fee plus a little bonus "fee on a fee." Back in 1998 when the school board hired construction managers, the contracts said that the managers would get a fixed fee of 4% of the estimated cost of each project. But those same contracts miscalculated the fixed fee.
When it came time to pay the managers, Ernie and the school board ended up paying the 4% fee of estimated costs and then kicked in an additional 4% of the 4% fee. When you're talking about millions of dollars of construction, paying an extra 4% of the contractual 4% fee meant that tens of thousands of taxpayer dollars were wasted--money that could have been spent on schools went to managers as a bonus for the difficult job of largely managing themselves!
Another thing I remember about Ernie is a press conference he called in November 1999 right after I first raised questions about Hamblen County School Construction Managers being paid to build schools and also being paid to manage themselves. The board always hated the term "paying people to manage themselves" but that's what happens when you allow a conflict of interest.
[I also had questioned the illegal West High Baseball Stadium bidding where an advertisement for bids ran in the local paper, but potential bidders--all except the firm that was the only bidder--were told by the architect that there were no plans. Later it was discovered that the "plans" that the one bidder had been allowed to have were stamped with the same date as the bid date. With the West High Baseball Stadium bidding, Ernie had to admit that the school board had made a "mistake" but then came the spin explaining that it was a really good bid and no one could have bid lower even if there had been one of those silly old, time-consuming, legal and competitive biddings.]
When Ernie tackled the sticky question of construction managers getting 17-18 no-bid contracts and being paid to build schools while they were also paid a management fee to manage their own construction work, Ernie proudly announced that the School Board's attorney Scott Reams had reviewed everything and had given everything his seal of approval. Ernie even had a letter from the attorney to back him up. When Ernie was asked to provide the Reams letter that presumably supported the board's version of construction management and paying people to manage themselves, Ernie claimed that the letter was attorney client privileged. In other words, Ernie would TELL you his version of what Reams said, but Ernie would NOT let anyone see the actual letter.
A Judge later ruled that the letter was attorney-client privileged communication, but the question always remained as to why Ernie would "use" the letter to say everything was OK but would not agree to release the letter. The attorney-client privilege can be waived, but the School Board voted unanimously to keep secret what its attorney really said about the construction management arrangement.
If you are a School Board member who has a legal opinion that says that what you have done is on the up-and-up, wouldn't you want people to see that opinion? Even if you could hide the opinion behind attorney-client privilege, why would you do that? Government attorneys give opinions all the time--sometimes publicly in meetings and sometimes in writing at the request of a government official. Most of those written opinions are public record. And the opinion is made public---especially if it actually supports the opinion or actions of the requester.
Just about everybody--except those involved--knew that paying people hundreds of thousands of dollars to manage themselves didn't pass the smell test and at that time the question of paying a "fee on a fee" was not even being discussed.
Ernie left the School Board in September 2002--but I believe he was still around in the summer of 2002 when the state legislature unanimously passed a clarification to the school construction management law that made it clear to the Hamblen County School Board --and to any other Board that might have been thinking of the same thing--that you can't use public dollars to pay people to manage themselves.
The clarification of the law came about after I had gotten tired of talking to the Board and had gone to the State Comptroller's Office in August 2001 to explain exactly what was going on in Hamblen County. At the beginning of the very next legislative session, the Comptroller introduced the clarification that stopped the sham no-bid construction contracts and the paid self-management that was taking place in Hamblen County (paying people to manage themselves!). The legislative vote was unanimous. The Hamblen County School Board didn't see a problem but every legislator in the state did--including the state representative and state senator for Hamblen County!
Ernie was also closely involved with the dismissal of former superintendent Sam Shepherd and the confusion surrounding the handling of the evaluations of Dr. Shepherd.
As I recall, Ernie moved out of the school board district (13/14) that he represented before his term was up but did not resign his school board seat.
I can just imagine the behind-the-scenes deals and contracts that Ernie will engineer or be involved in if he is appointed to serve on the county commission. Time will tell if there are commissioners who have forgotten or simply don't care about these and other things that Ernie has been involved in.
Of course, everything may change between now and Thursday. We'll just have to wait and see who ends up being nominated and who ends up getting the appointment.
Monday, May 18, 2009
In a multiple candidate race for a city council at-large seat, Gene Brooks was the winner, Swann was a close second, and incumbent Rick Trent was third.
Swann's ad points out that Brooks received 31% of the total votes cast and that only 14% of registered voters even bothered to cast a vote. Swann concludes that Mr. Brooks was elected "WITH LESS THAN 5% OF THE TOTAL REGISTERED VOTERS." Mr. Swann forgot to add that he (Swann) received even fewer votes than Brooks, so Mr. Swann also received the votes of "LESS THAN 5% OF THE TOTAL REGISTERED VOTERS.
Swann then refers to holding accountable "those elected by a minority of our citizens." Mr. Swann was probably taking a stab at Mr. Brooks, but this comment could also apply to the current Mayor Sami Barile. Barile, like Brooks, was elected in a multiple-candidate race in 2007, and Barile, like Mr. Brooks, received the votes of less than a majority of the actual voters and less than a majority of registered voters. [If Mr. Swann had received 1 more vote than Gene Brooks, Swann himself would have been one of "those elected by a minority of our citizens."]
Mr. Swann's ad also criticizes the local press for not fully investigating the candidates. Perhaps Mr. Swann hasn't noticed or perhaps Mr. Swann just hasn't been negatively affected by the press until now, but true investigative journalism does not exist in the offices of the Citizen Tribune. Mr. Swann is correct that there is no true in-depth investigative journalism at the Tribune.
What the Tribune lacks in investigative journalism and true news reporting, however, it makes up with lots of fluff and government press releases passed off as news. The Tribune has a monopoly on what information goes out to the public and a monopoly on political ads---like Mr. Swann's.
Sunday, May 17, 2009
May 17, 2009 Tennessee Comptroller Justin Wilson Expresses Concerns about City and County Variable Rate Debt/Swap Agreements
Tennessee State Comptroller Justin Wilson is looking at the use of variable rate debt/derivatives/swaps by cities and counties, and the new Comptroller apparently doesn't like what he sees.
Wilson points out conflicts of interest and notes that the complexities of these debt instruments may make them unsuitable for small cities and counties. Wilson's guest column in the Memphis Commercial Appeal is here. Other people such as investor/financier Warren Buffett have pointed out the dangers of derivatives as well.
In addition to the inherent financial dangers associated with derivatives, even a blind man could see the multiple conflicts of interest surrounding Joe Ayres/Cumberland Securities/Morgan Keegan/Regions Bank/TNLoans who provide and market variable rate swaps/derivatives to Hamblen County and other Tennessee cities and counties.
The fox (Joe Ayres/Cumberland Securities) is watching the henhouse (taxpayer debt) and being paid in multiple ways and through multiple entities to do the watching. Click here for a previous post on Hamblen County debt and Joe Ayres. Joe Ayres and his cohorts and companies are collecting, directly or indirectly, fees and commissions and profits through several entities with various connections to the debt issuance process.
The local press doesn't talk about the county's debt. The Trib just selectively reports the information that the county puts out. As a result, Hamblen County residents have to turn to The New York Times or the Memphis Commercial Appeal to read about the questionable actions of Joe Ayres/Cumberland Securities/Morgan Keegan/Regions Bank/TnLoans in Tennessee. Articles have also appeared in the Knox News-Sentinel, the Nashville Tennessean, and other newspapers.
On May 12, the county had CTAS (County Technical Assistance Services) give a presentation on the county's debt. Mayor Purkey, the county's chief financial officer, didn't bring in Joe Ayres (the fox) to review the debt (henhouse) this year even though Joe has always done so in previous years. Where's Joe?
Of course, another problem with recent Hamblen County debt is that it never gets paid off! Over the course of about ten years (1998-2008) NOT ONE PENNY OF THE LAST SCHOOL BUILDING PROGRAM (1998) WAS PAID OFF. Click here for a previous post and a link to Hamblen County's 2008 Audit and pages on debt.
About a year ago, a lot of the county debt was refinanced resulting in Hamblen County owing more after the refinancing that it owed before the refinancing. Deeper and deeper into debt we go.
And yet you have some county commissioners and all the school board members talking about embarking on another, even larger, school building program and even talking about making "interest-only" payments again.
To talk about a huge increase in county debt (up to $80M more) when unemployment is high in Hamblen County and in the City of Morristown, when businesses are leaving and cutting back, when our furniture and automotive-connected businesses are laying off, and when individuals in Hamblen County and across the state are struggling is fiscally irresponsible.
And let's not forget that the debt figures that they are tossing around are the amount of principal only. Most county officials and school board members conveniently ignore the interest costs during building program discussions.
If the county takes on another $80 million of debt for school construction while it still owes about $40 million from the 1998 school construction program ($35 million) and county projects (about $5 million), then the principal owed will be around $120 million. The total cost to the taxpayers (principal and interest) on that $120 million could be $200 million or more--especially if they go the interest-only route for many years. That's $200 million! $200,000,000.00! And that does NOT include the hospital debt for which the county is ultimately liable should hospital debt revenues fall short of hospital debt expenses.
But this is the government. Different rules. Other People's Money (OPM). It's much easier to go into debt with other people's money (OPM) than it is to do so with your own money.
I'd like to know which commissioner has taken out a huge mortgage (1998) and then has thrown away money by making interest only payments for 10 years so that when the debt is refinanced 10 years down the road (2008), he/she owes more than was owed at the start of the loan?
Only a commissioner or elected official who has done this or who would do this WITH HIS/HER OWN MONEY should promote this kind of debt scheme with taxpayers' money.
On May 14 during discussions of Hamblen County's debt fund, a commissioner asked "Where is Joe Ayres?" [Mr. Ayres always used to come to commission during the budget process to explain the county's debt position] There was no clear response to that question from County Mayor David Purkey, Trustee Bill Brittain, or Finance Director Nicole Buchanan.
The question remains unanswered.
Where is Joe Ayres?
Tuesday, May 12, 2009
Other than the Mayor, Councilmembers, City Administrator Jim Crumley, and a few members of city staff, only Tribune reporter Bob Moore, Gwen Holden, and I were present.
Revenue projections and expenditures were discussed, and I will go into both in more depth in future posts.
A significant and strongly worded recommendation to Council came from City Administrator Jim Crumley regarding the city's 2008 audit or lack thereof. Crumley's recommendation: You need a new auditor.
As reported previously, the city audit for the fiscal year that ended on June 30, 2008, is still not available. That audit was due December 31, 2008. It is so late now that Dennis Dycus of the State Comptroller's Office, Division of Municipal Audit, has called the city to find out what's going on.
The "lateness" of the city audit is nothing new, but it was underscored this year when the city found itself having to provide financial information to Moody's Investor's Services in order for Moody's to assign a debt "issuer" rating for the city.
Because 2008 audit figures were not available, Crumley and city staff had to provide "unaudited" figures for Moody's to use in its evaluation of city debt.
Jim Crumley stated to the Mayor and Council almost exactly what I stated in my April 29 post. You need to get a new city auditor. Click here for my April 29 post and scroll to the last paragraphs to see my comments on changing the city auditor.
Crumley repeated those same sentiments, noting that to be without an audit now (10-1/2 months after the end of the audit year and 4-1/2 months after the audit due date) is not "acceptable" and adding that another problem that has been discovered is that the current auditor incorrectly accounted for accrual of property taxes.
Crumley and other councilmembers briefly discussed sending out a Request for Proposals to audit/accounting firms to let those firms present information on costs and services to be provided. Crumley said that it may end up costing more to have a new auditor come in, but the intention would be to obtain a timely audit and to have new eyes look at the city's finances. Has common sense really taken over city hall?
Yes, new eyes and new auditors are needed to look at the city's finances AND to provide a timely audit. The city should have done this years ago as a matter of policy. It is my opinion that auditors should be rotated about every five years so that "fresh" eyes are periodically looking over city finances. This is not a slam at auditors. It is just in the nature of the process that you miss things that you go over and over again repeatedly. You can catch typos and mathematical errors of others more easily than you can catch your own.When I served on county commission from 2002-2006, getting a new county auditor was my first priority. I pushed for auditors from the State Comptroller's office to replace the long-time county auditor and the rest, as they say, is history. The first audit by new auditors looking at the handling of county finances with fresh eyes resulted in 29 findings and irregularities--more than any other county in the state of Tennessee. The initial state audit of Hamblen County led to numerous corrections of lax procedures and violations of state law. The long-time county auditor at the time was the same firm that is currently the long-time city auditor.
My call to have the state auditors come in also resulted in a saving to the county of about $17,000 per year over the cost of the private auditor! Because I still think that fresh eyes are needed periodically for audits, I would like to see state auditor staff rotated from county to county periodically, so that counties could get the benefit of a fresh set of eyes but still maintain the cost savings of contracting with state auditors.
The county recognized the audit problem almost seven years ago and did something about it. Now, there is a recommendation that the city consider new auditors. Only time will tell if the city will at long last fix its "audit problem."
Monday, May 11, 2009
The city budget is in flux with numerous proposals on the table for generating additional revenue and in some cases making spending cuts.
There has been continuing talk in the public and at council meetings about the status of current City Administrator Jim Crumley.
One proposal that is under consideration is a plan to rein in Crumley---at least a little bit. Currently, Crumley apparently has authority to spend as much as $10,000 in appropriated funds in whatever manner he sees fit.
While this may sound harmless--after all it's just $10,000--the reality is that Crumley or any city administrator with such authority could substantially alter the original budgetary spending plan as passed by the council through a series of multiple $10,000 transactions.
This is where the council needs to stand up for accountability. There should be checks and balances in city government. The council should stand up and accept its role as the "check" on the city administrator's spending of city dollars.
I would expect car allowances and the power given or assumed by Crumley to give and increase car allowances for city employees will come up today or in future budget hearings.
Charging apartment residents/owners garbage fees will be a topic at some point.
And there is a lot more as the city tries to get its spending and debt under control.
It should be an interesting meeting.
Wednesday, May 06, 2009
Bob Garrett defeated former assistant City Administrator Jack Kennerly to take the vacant Ward 1 seat. Gene Brooks took the at-large seat, prevailing in a crowded field over former MUS head Bill Swann and incumbent councilman Rick Trent. Kay Senter retained her Ward 3 seat over challengers Charles Cook and Larry Lane.
As I predicted on Monday, the sales tax increase referendum passed yesterday. Only Hamblen County voters living outside the city limits could vote in this referendum.
Governments will not give up on getting more and more tax money as shown by the mutiple sales tax referenda held in Hamblen County in 15 months.
A single countywide sales tax increase referendum failed in February 2008.
After the countywide tax increase was rejected, the governments (Mayor Barile/city council and Mayor David Purkey/county commission) decided to go with a split-vote tactic, separating the failed countywide sales tax referendum into two separate referenda (inside the city and then outside the city) with two separate goals.
The city voters passed the sales tax increase inside the city limits in June 2008 after being offered a 15-cent property tax reduction in exchange for a YES vote on the sales tax. The city's pick your poison referendum was: Either pay the 40-cent tax property tax increase OR pay a 25-cent property tax increase and an increased sales tax!
Yesterday, the county voters passed the sales tax increase outside the city limits after being told that they had to pass the sales tax increase in order to get some of the tax dollars being collected by the city flowing to the county schools.
[NOTE: The city had previously used the "for the children" mantra in trying to get support for the first (countywide) sales tax referendum in February 2008. Click here to see Morristown Mayor Sami Barile's letter expressing concern for the children and education. When that referendum failed, the city held a city-only referendum which passed in June 2008.
After passage of the city-only referendum, the city's concern "for the children" evaporated. The City considered giving some of its "excess" sales tax money to Hamblen County Schools but decided not to. The city's concern for education boiled down to this message to the county and school system: "You'll have to pry that money from my cold, dead hands."]
With a referendum on a sales tax increase, the government never gives up. With Hamblen County's initial rejection of an increase, it then became a "divide and conquer" battle. Offer one group (city voters) one thing and then hold another referendum and offer another group (county voters) something else.
Just get those higher taxes passed! Anyway. Someway. Every which way.
Monday, May 04, 2009
Click here to see how the blackmail referendum came about.
Here's the 15-month saga in a nutshell showing that the government--city and county--never give up on getting more tax money! County commissioners and County Mayor David Purkey saw the first countywide sales tax increase defeated in February 2008 despite the letter sent out by Ford and Purkey on county stationery and despite never-ending Tribune front-page press releases supporting the increase.
The City, which had just raised its property tax rate by 40 cents in 2007, decided to try again and again offered a carrot to city voters in order to get the increase passed citywide. The carrot: the city would roll back its historic and unprecedented 40-cent property tax increase to "only" a 25-cent increase IF city voters would support a sales tax increase in June 2008. City voters said "it's a deal." See the taxpayer-funded letters sent out to city voters here.
Now the county is piggybacking off the city results. Several commissioners, Mayor David Purkey, and school board members are happy that the city passed the tax increase in June 2008 giving the county yet another opportunity to push for the increase "outside" the city limits.
The Chamber has asked its members to get out and vote for the increase.
The School System has encouraged voters---including, of course, the huge block of school system employees---to get out and vote for the increase.
Several county commissioners, including commission chair Stancil Ford, are going around encouraging a YES vote on the increase.
County Mayor David Purkey, who signed letters on county stationery supporting a sales tax increase in 2008, is still on the tax 'em more bandwagon even if it takes a two-step referendum to get there.
The Tribune has run its editorial supporting a sales tax increase just like it did back during the 2001 sales tax increase referendum (which failed) and just like it does every time that most any tax increase is on the table.
So...the city finally got what it wanted in June 2008 and the rest is history.
The county has held down interest in tomorrow's sales tax referendum by scheduling the referendum on a date when no other county office or issue is being voted on. Unlike city voters, county voters are not being offered a property tax decrease. There will be a low overall county voter turnout but a high turnout of school and chamber voters and the referendum will likely pass this time.
And Director of School Dale Lynch has not prioritized his spending or said exactly where any additional sales tax money will go---but you can rest assured that all your tax money WILL BE SPENT and that everyone will come back asking for MORE.
Saturday, May 02, 2009
A subcommittee in the Tennessee House of Representatives has quietly approved legislation providing for "automatic" increases in Tennessee's gasoline tax based on the consumer price index.
Tom Humphrey has the full story here.
Here's another idea for those Tennessee state senators and representatives who want to put tax increases on auto pilot so that there is no accountability for ever-increasing taxes.
How about legislation providing for an "automatic" reduction in legislative pay for each "automatic" increase in taxes?
Friday, May 01, 2009
Win the Vote reports taking in $2,380. [$1,680 in unitemized contributions under $100/each. $700 in itemized contributions from two individuals: $500 from County Commissioner/Win the Vote organizer Ricky Bruce and $200 from Hamblen Schools Supervisor of Business/Win the Vote treasurer Traci Antrican.]
The group appears to have already paid out $530 [$30 for a voter list and $500 in itemized expenditures "over $100 to each payee."]
Win the Vote lists itemized expenditures of $2,850 for postage and mailing and $115 for a sign as outstanding obligations.