Johnson County officials intend to lower the county’s overall debt and complete pending projects through an untraditional strategy.
They are going to take out a loan.
Johnson County Treasurer Tom Kriz approached the Board of Supervisors Thursday to discuss the need for a substantial loan. The loan, roughly $12.65 million, would help fund improvements to county buildings and projects.
Kriz wants to use borrowing, rather than straight forward paying, as an economic strategy, which will allow the county to draw revenue from sources it typically would be unable to access.
The loan would be used to acquire computer equipment, construct roads and bridges, replace the Secondary Roads facility, demolish flood-damaged buildings, pay for insurance, and purchase new vehicles for emergency services.
By creating a temporary debt with loans, the county will be able to access sources of revenue it normally couldn’t due to a revaluing of property that occurs when a county is in debt.
Supervisor Chairwoman Janelle Rettig said that while this maneuver may seem counterintuitive, it will help to reduce the county’s overall debt, which stood around $15.69 million at the beginning of fiscal 2014.
“Our debt will be lower at the end of the fiscal year than it was at the beginning,” she said. “We’re not accumulating debt because of this, because we’re borrowing strategically. At the end of the year, we’ll only be around $12 million in debt.”
Supervisor Rod Sullivan said borrowing money was the intelligent move to make.
“The main reason we’re doing this is because it allows us to tap into areas and districts we otherwise wouldn’t be able to tap into, so it spreads the tax responsibility among more taxpayers,” he said.
In the past, Johnson County has been able to borrow the entirety of its loans from Hills Bank; however, this is the first time in recent years the loan will exceed the bank’s $10 million maximum on tax-exempt loans. Kriz said the additional $2.65 million will have to be bidded separately and come with a much steeper interest rate as a result.
“We’ll have a small portion that’s not tax exempt that we’ll be bidding out, so we’ll keep the pay-back on it extremely short-term because that will be a higher interest rate,” Kriz said.
In order to make the loaning more efficient, the supervisors intend to have the majority of the loans repaid within 90 days to prevent interest rates from growing.
Kriz and the supervisors expressed confidence in the use of loans to help offset county debt. The supervisors set a public hearing on the loan agreement to take place at 9 a.m. March 20.