Jim Folts   Blount County Commissioner

 

“To stand in silence, when they should be protesting, makes cowards out of men” - Abraham Lincoln

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  • Blount County Commission - Thursday March 15th, 7:00 pm, room 430, Blount County Courthouse
  • Citizens for Blount County's Future - Tuesday March 13, 6:30pm, Blount County Library

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Feel free to let me know your views on county issues
. Just send me an email at jimfolts@gmail.com, or give me a call at 995-9476.


The Blount County Commissioners


Citizens for Better Government
 


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February 2012 Report


Good News - Real progress in improving our County schools
School Superintendent, Dr. Rob Britt, gave the Commission a presentation on the improving educational achievements of the students in our County Schools. His teams of administrators and teachers are producing impressive results. I will devote a special report to this good news later this month. (Click here to see the special report on our County Schools)


County adopts a debt policy – but door still open for bad bond deals

The Blount County Commission adopted a debt policy. This policy was supposed to stop the bond abuses that have cost the County taxpayers millions of dollars. The new policy fails to achieve this goal.


The new policy pretends to forbid the use of variable rate bonds and interest rate swaps. But, it includes huge loopholes, which permit more of these highly questionable transactions. For example, on page 4, under ‘County Goals’, it says: ”the target is to have no more than 20% variable rate debt”. It also says another goal is to: “reduce interest rate derivatives to 0%”. 


Unfortunately, the debt policy contradicts these goals on page 8, in the paragraph titled Variable Rate Debt. In that paragraph, it says that the goal is to get variable rate debt to 20%, “excluding debt which has been converted to synthetic fixed rate debt”. Most of our debt purports to be “synthetically fixed rate” today. Synthetically fixed rate debt requires the use of derivatives. Using this measure of variable rate debt, this loophole means that the County is not committed to reducing its variable rate debt, and interest rate swaps, at all.


Item g of the same paragraph on page 8 makes the situation even worse. It says: “Variable rate bonds may be used in conjunction with a financial strategy, which results in synthetically fixed rate debt”. This allows the County to issue more of the crazy variable rate debt and swap transactions that have cost our taxpayers millions.


The effect of these two loopholes is to destroy the key stated goals of the policy.


It is important to understand the term “synthetically fixed rate” is a Wall Street term, designed to baffle ordinary mortals with nonsense. Synthetically fixed rates are not fixed at all. Unlike real fixed rate bonds, synthetically fixed rates can vary all over the map. For example, the “synthetically fixed” rate on the County’s A-1-A bonds shot up from 4.37% to 6.59% from 2007 to 2008. The synthetically fixed rate on the County D-1-B bonds increased from 4.29% to 6.29%. This raised the interest cost to the taxpayers by more than $720,000 per year on these two issues alone. Synthetically fixed rates are NOT fixed. The term “synthetically fixed” rate is a lie, designed by Wall Street bond salesmen to entrap the gullible and unsuspecting in bad deals.


Blount County is facing more than $24 million in swap termination charges from the synthetically fixed rate deals we already have. This is nearly double what these termination charges were last year. I think the citizens would like to see us get rid of these variable rate bonds and derivatives at the earliest possible time. 


Unfortunately, the Commission approved the debt policy with loopholes that permit more of these bad transactions. I cast the only vote against this nonsense. Commissioners Murrell and Harrison were absent.


This policy will continue to make bond salesmen and investment banks rich with fees, while creating big problems for the County and its hard pressed taxpayers.


Another questionable bond-related transaction approved

The Commission was asked to approve the purchase of a new letter of credit from JP Morgan to support one of the County’s variable rate bonds. The County must purchase letters of credit to support its variable rate bonds because its credit rating is not good enough to offer these bonds directly. The continuing need to obtain these letters of credit is just one of the many risks associated with the $100 million worth of variable rate debt the County still has.


The problem with the proposed deal, was that no Commissioner could be sure the County was getting the best deal. This transaction was not done via competitive bidding. Finance Director Jennings told us in the Agenda meeting that he did not negotiate this deal. He said that bond salesman, Mr. Joe Ayres, handled the negotiations. 


But I cannot figure out whose interests Joe Ayres really represents. Ayres and his wife control a private company called TN-LOANS. TN-LOANS cut a deal with the Blount County PBA (the agency that issues all variable rate bonds for the County), which was never approved by the Commission. This deal currently requires the County to pay TN-LOANS $200,000 per year for a set of questionable services. I say “currently”, because this agreement also has an amazing provision that lets TN-Loans set their own fee, in their “sole discretion”. The Commission was asked to believe that Ayres is negotiating for us in his TN-LOANS capacity. 


But, Ayres is also a Managing Director of Morgan Keegan, an investment bank. Mr. Jennings told us Morgan Keegan is also involved in this transaction. Morgan Keegan is a broker. As a broker, Morgan Keegan may be being paid by JP Morgan to get the highest price from the County for the letter of credit. This would clearly be a conflict of interest. This is why, in the last Commission meeting, I asked the Mayor to get a letter from Ayres detailing ALL fees, stated or hidden, being paid as part of this deal. The Mayor did not provide this letter.


How do we know that we are getting the best deal? It is as if the County went to buy a used car, and the salesman tells us he is getting us the lowest possible price. All the while, he is being paid a commission for getting the highest possible price. And, we are being asked to believe him.


I refused to vote for a deal with all these unresolved conflicts of interest, and with the questions about JP Morgan’s credit rating. The remaining Commissioners who were present voted for the deal. 


Nominating officials with no information on qualifications

The Commission was asked to approved nominations to the Sheriff’s Merit Review Board. 


By Commission rule information is supposed to be made available five days before the meeting, to permit Commission members to consider and check the qualifications of candidates for all positions. The resumes on these individuals were not placed in the made available until shortly before the meeting.


The resume on one individual consisted of one sentence. I don’t know of any business that would hire someone based on a one-sentence resume. I voted against this nomination, but the Commission went ahead and approved the candidate anyway.

 


Only YOU can change YOUR government
PLEASE come to the Commission meeting Thursday, March 15th at 7:00pm in Room 430 of the Courthouse