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Should Inyo County take on more debt?

August 23, 2011

Leslie Chapman

County leaders are considering taking a loan to help pay for some capital improvements, but want to ensure Inyo will get the most bang for its buck before committing.
Inyo County paid off its debt earlier this year, and since then has boasted that it is one of the few debt-free counties in the state, or even the U.S.
This week, Auditor Controller Leslie Chapman went before the board during a budget hearing to broach the subject of taking on new debt that would keep county resources and facilities up-to-date and in operational order.
Up until this year, the county was paying approximately $400,000 a year on its debt.
“Right now, we’re used to paying the debt service, so it seems like a good time to discuss taking a loan to do capital maintenance this county has never been able to afford,” Chapman said.
According to Chapman, the county has a couple options when it comes to the money it could be saving on the debt service payments. She said those funds could be thrown into the county budget to offset rising costs, or it can be invested in a new loan to pay for electrical upgrades, facilities at the Inyo County Animal Shelter and to purchase new property tax software the county needs.
“If that money goes into operations, those projects will never get done,” Chapman said.
Fourth District Supervisor Marty Fortney pointed out that interest rates for loans are currently low and Third District Supervisor Rick Pucci added that construction costs are down, which would make it an ideal time to invest in debt to work on capital improvements.
But all five board members said they were apprehensive about taking on new debt the same year the county paid off its debt.
“I’m not a lover of debt,” said Fifth District Supervisor Richard Cervantes. “Fifteen counties in California are in fiscal crisis with three more on the way. Debt service is more binding than a marriage.”
Cervantes went on to say that the fiscally conservative counties in the state are not facing financial problems.
Second District Supervisor Susan Cash said she was hesitant to take on new debt and pay interest, and would be more comfortable putting the $400,000 the county has used to pay its debt services aside for projects.
In response, Chapman said that, considering the state of state finances, attempting to put money aside could be difficult as the county struggles to balance its budget.
Chapman had laid out a preliminary list of projects the county could complete with the loan, including purchasing software, solar panels, upgrading electrical systems and putting money aside for deferred maintenance.
The board directed Chapman to compile a more complete list of projects that could be finished with the loan and come up with a firm cost estimate for all projects.
From there, the county will have an idea of exactly how much money it needs, and how much it will cost to obtain that money.
“It’s our responsibility to analyze how long we can put off these costs,” First District Supervisor Linda Arcularius said.
“We are debt-free, but at what cost?” Cash asked. “How long can we continue to have buildings in need?”
Pucci recommended the board take the $400,000 in debt service money and set it aside in case the county does decide to take a loan. “If we decide not to, we can move the money into a usable account.”
The board agreed. Chapman will come back at a later date with more information on needed capital improvements, at which time the board will make its ultimate decision.

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