Carl Henson

A faltering economy and the related credit crisis are felt to varying degrees by local governments in Northwest Georgia.

“We would like to get started on projects, but none are so pressing that we need to rush forward now,” Walker County Attorney Donald Oliver said.

“Whatever we do, we are stuck with it for six years,” he said, referring to the county plan to issue bonds for capital projects, repaying the notes from revenue generated by a special purpose sales tax voters approved in July.

“There is no liquidity in the market right now, so we are taking a wait-and-see position until the market stabilizes,” said Mr. Oliver, who is acting as go-between for the county and its financial advisers.

The 1 percent SPLOST is projected to generate $38 million over six years. It will pay off bonds that will pay up front for paving, bridge building and the purchase of vehicles and equipment.

“We are going to do a public offering, but we are waiting on investment bankers to get proper feedback from the market,” Mr. Oliver said, noting county bonds are a desired investment for some. “We are waiting for the market to settle down to a point where we can get an interest rate we feel we should have with our credit rating.”

Rating agencies recently upgraded the county’s bond rating for the first time since 1998, he said, from A- to AA-, which should lower the county’s cost of borrowing.

“In normal markets that would translate to a savings of about $100,000 each year over the six-year SPLOST,” he said. “Regardless of the rate we get, it (the rating upgrade) should save about $600,000.”

While everyone wants to get started on projects, Mr. Oliver said it could be a week or more before any action is taken.

“The reason for doing bonds is moving forward, but not at unfavorable rates,” he said.

Dade County Clerk and Finance Officer Don Townsend said his county, also with a new SPLOST, is in the same boat.

“It (the credit crunch) has definitely had an effect,” Mr. Townsend said. “We hoped to have a rate of 3 to 4 percent, but everything has gone haywire.”

Investment bankers with Morgan Keegan told Dade County officials several weeks ago that “things looked pretty bad” and advised a public offering rather than the more common private placement of county bonds, Mr. Townsend said.

“Dade County is small, and for a $6.5 million total you normally would not take to the floor of the New York Stock Exchange but would rather shop it to banks,” he said. “But bank rates are making it unattractive.

“We must now go through the process of having our ratings assessed,” Mr. Townsend said. “We are not being challenged, it is just that all numbers are being triple checked.”

Dade County projects revenue of more than $18 million during the tax’s life of a maximum six years, and would like to start work now with money from bonds paid off by the sales levy, Mr. Townsend said. “What was a pretty simple routine has turned into a challenging ordeal over the past two weeks,” he said.

Catoosa County Finance Director Carl Henson said the general economic pickle could affect the amount of local sales tax collected, regardless of bond issues.

“We’ve seen a slight downturn in revenue,” Mr. Henson said about the sales tax, also just renewed by county voters. But he said It’s hard to gauge how much revenues might slip or for how long.

“We allocate revenue on a pro-rata basis for all projects. If the revenue falls short, then all projects will be short by the same proportional amount,” he said.

Mr. Henson said Catoosa County did not plan on “forward financing” special purpose projects.

“We did not (issue bonds) in the last SPLOST cycle,” he said. “In the 1999 cycle there were some bonds issued. Definitely, in this economy, it would make it hard to go out and negotiate for that kind of financing. Plus the uncertainty of the return, the revenue, would also make it hard.”

The credit upheaval isn’t affecting the city of LaFayette, City Manager Johnnie Arnold said.

“Nothing except the inflated energy costs is affecting us,” Mr. Arnold said. “Local governments generally do long-term financing. We do not operate on credit and are financially sound.”

Fort Oglethorpe Mayor Ronnie Cobb said the nation’s fiscal crunch won’t directly affect his city’s plans.

“We have some money leftover that will carry us until we can accumulate a year or two of (SPLOST) collections,” he said.

Staff writer Beverly Carroll contributed to this report.