Just exactly how much debt does Switzerland County have?
Just exactly how much debt is Switzerland County responsible for?
Depending on how you read and interpret the figures, that could be a $7 million question.
As Election Day nears this Tuesday, the central point of controversy between both political sides has been the amount of debt that the county has. In an effort to simply answer that question, Vevay Media Group asked Switzerland County Auditor Gayle Rayles for documentation showing the county’s total debt, and why it was taken on.
But, even with figures provided from State sources, the exact figure isn’t really clear.
What isn’t contested is that the County debt question comes down to three transactions:
– A Bond held by Friendship State Bank.
– A Bond held by MainSource Bank.
– A Bond held by Keystone Construction/Development.
What’s also not contested is that, to this point, all of the debt is being paid using riverboat revenue coming into the county, not by property taxes.
The bond held by Friendship State Bank is in the name of Switzerland County, so it is unquestionably ‘county debt’.
The bond was originated in 2009 in the amount of $3.1 million. It has an interest rate of 3.5-percent, but that interest rate will rise as the amount of principal left on the loan falls.
The county borrowed that money for infrastructure (paving county roads, $1 million); the Moorefield/Bennington Regional Sewer District project ($800,000); the addition on the Switzerland County EMS building and additional EMS equipment ($800,000); and work on the Patriot Boat Ramp ($500,000).
At this point, the loan has a balance of $1.72 million dollars; and the county pays approximately $400,000 each year in principal and interest. The bond is due to mature (be paid off) in 2019. The county makes a payment every six months for approximately $200,000.
From this point on, the remaining debt is in different circumstances – but owed.
Auditor Rayles said that the county created two bonds in 2006 through MainSource Bank in order to purchase and then make improvements to the Markland Business Park.
The two bonds, one for $500,000 (park infrastructure) and one for $4 million (park development), were paid down by the county until 2012, when the Switzerland County Redevelopment Commission refinanced those two bonds and consolidated them into one bond.
What resulted was what is called, “Gaming Revenue Bond Series 2012”.
That refinanced bond totaled $3,090,000; but when the consolidation happened, the bond was issued in the name of the Switzerland County Redevelopment Commission – not the county.
In fact, Switzerland County government does not appear anywhere on the bond as a debtor. The entity responsible for the debt is the Switzerland County Redevelopment Commission, but the bond does outline where the funds come from for the payments.
The bond states: “…The principal and interest on this bond and all other bonds of said issue, are special revenue obligations of the Switzerland County Redevelopment District, as a special taxing district, payable solely from the Gaming Revenues (as defined in the Resolution) appropriated by the County Council of the County, in its sole discretion, and received by the Commission from the County (such appropriated and received Gaming Revenues, the ‘Pledged Revenues’)…”
The bond states that the casino revenues used to pay for the debt are coming from the County Council, but come solely at the discretion of the county.
The rate on that bond is fixed at 3.35-percent, and the bond has a maturity (pay off) date of 2022.
This bond has payments that require a yearly payment of principal and an interest payment every six months.
That yearly payment, including the two interest payments, totals about $400,000.
At this time, there is a balance on this bond of $2,710,000.
The third debt issue centers on the Switzerland County Technology and Education Center, which is located on West Seminary Street.
This bond is also in the name of Switzerland County Economic Development, not Switzerland County government.
But, as with the Markland Business Park bond, the county is making the payment using casino revenue.
The building and its payment was based on the county telling the contractor, Keystone Construction/Development, what was wanted in the building. The contractor then built the building to those specs, and once it was finished, Keystone Construction/Development became the owner of the building – and Switzerland County became a tenant.
The bond is structured with Switzerland County Economic Development basically having a five year ‘lease’ on the building. Payments are made over the next five years – and then some decisions will be made.
There are several options: the Economic Development Commission (using county money) could issue a bond and buy out the balance of the Keystone Construction/Development agreement and begin making that payment; Economic Development Commission (using county money) could renegotiate the repayment schedule on the balance with Keystone Construction/Development; or Economic Development Commission (using county money) could pay off the balance and own the building outright.
There is another option is that, since the terms are set up like a lease; is that once everyone is five years into the agreement, the Economic Development Commission could choose to walk away.
If that were to happen, the county would contractually have to reimburse the Ec015 group the funds that the group has invested in the building. Keystone Construction/Development would then own the building.
That probably isn’t going to happen, but it is an option.
Again, this debt is officially the responsibility of the Economic Development Commission; with the county paying the payments.
As of the last payment, the balance on the bond with Keystone Construction/Development is $2,607,891. The county is making a payment annually of $250,000 – about $125,000 twice a year – for five years. There is a fixed interest rate of 3.87-percent.
Again, officially, according to the debtor name on the bond, the county isn’t obligated to pay the bond, but in the process of deciding to build the TEC Center, and to purchase and develop the Markland Business Park, agreements were made for the county to make those payments.
All of this totals, for the three bond issues, $7,037,891; with the county making payments of approximately $1 million per year in principal and interest – all of which comes from riverboat revenues. No property tax money is being used to pay any of this debt.
Auditor Rayles said that, in general, the county receives about $10 million per year in casino revenues. Out of that, the first $2 million comes out and goes to Crawford, Jefferson, and Ripley counties because of the agreement that the state insisted on when the riverboat license was granted here.
Out of the $8 million remaining, about $2.4 million of that is ‘shared’ by county government with a variety of entities, from the school endowment corporation to the fire chiefs association; each Township Trustee gets a portion; as do the towns of Vevay and Patriot. There are also several smaller groups that get a small percentage of the revenue.
That leaves $5.6 million for county government, and that’s where this debt is being paid.
As casino revenues dropped over the past year, the County Council reviewed the revenue sharing in the county and made some adjustments to that formula, which kept more of the revenues in the hands of the county to be used for countywide projects.
According to Switzerland County Treasurer Vickie James, at the close of Friday, October 24th, the county ledger showed a balance of $6,683,368.96; of which $996,994.06 is unencumbered, which means it hasn’t already been directed to a specific entity or project.
So what this comes down to is that the county entered into debt at different times over the past 8-10 years to do a variety of things: pave roads, create a regional sewer district, improve a community boat ramp area, expand the emergency services building, purchase and improve land for a county industrial park, and build a technology center which also houses some county offices such as the extension service and emergency management.
That created debt, and the county has been and continues to pay that debt down using riverboat casino revenues. Those debts are on scheduled, regular payments; and will continue for anywhere from the next five to 20 years, depending on individual bonds.
Is this a legitimate debt load for the county? Is the debt worth having the facilities that resulted from the debt? Only each individual can make those determinations.
– Pat Lanman