A proposal by the school system to pay off debt early was shot down by members of the budget committee in a split vote Monday evening.
As part of the 2014-15 budget, the Carter County Commission added 10 cents to the debt service fund and earmarked it to fund architect fees for a proposed new middle school in the Stoney Creek community. With the plans for the school on hold, the Carter County Board of Education voted unanimously to ask the county to use that money to pay off existing school debt notes ahead of schedule.
During Monday night’s meeting of the budget committee, Director of Schools Kevin Ward presented the debt service proposal, saying the plan could potentially create a large savings for the county.
The amount originally allocated for the school project funding was about $800,000. However, Ward said, because the debt service was insufficiently funded for 2014-15, only about $660,000 was left for the proposal.
The school system asked the county to take $478,629 from that money and pay off the note for renovations at Unaka High School. During the 2015-16 fiscal year, Ward said the second school note would be paid off on schedule. The proposal, he said, is to take the money currently used to pay on those notes and add it to payments on the school system’s third debt note.
In that way, Ward said, the note for Cloudland High School could be paid off in four-and-a-half years rather than 14.
“That will free up 13 cents on the tax rate once that is paid off,” Ward said. “It will accumulate up to $1,250,000 in savings.”
Not everyone agreed with Ward’s figures.
Carter County Mayor Leon Humphrey described Ward’s estimated savings as “inflated” and said his own calculations showed the actual savings would only be about $275,000. He also debated Ward’s claim the plan would ultimately lower the tax rate.
“This is going to force a tax increase on the people of this county,” Humphrey said.
Humphrey briefly presented his own proposal, which he said would pay off the school system’s debt in six years, build up reserve funds and would not result in a tax increase.
County Finance Director Ingrid Deloach said she supported the claim by Ward the school system’s proposal could save up to $1.2 Million because two of the notes were variable interest rates, and although rates are currently just below 1 percent, the county has to budget for 5 percent interest to allow for a buffer if the rates increase.
Some members of the committee voiced concerns with the troubled debt service funding because in years past money was taken from that fund to balance the budget without tax increases.
Committee member Ronnie Trivett made a motion to leave the allocation alone in debt funding without adopting either proposal for early debt pay off. The motion was seconded by Robert Carroll and passed on a vote of 6-2 with Trivett, Carroll, Nancy Brown, L.C. Tester, Ross Garland and John Lewis voting in favor. Buford Peters and Sonja Culler cast dissenting votes.