Some local officials aren't happy about Gov. Sonny Perdue's plan to sell more than half a billion dollars in state loans for water and sewer projects to private investors.
As the state's Georgia Fund for municipal projects gets sliced 40 percent this year, Gov. Perdue asked the Georgia Environmental Facilities Agency's board of directors to explore the sale of $592.6 million in loans to private investors -- all without formal input from local governments or the state Legislature.
"The question is what it affects with interest rates for future loans that local governments will try to get from GEFA," said David Ashburn, Walker County coordinator. "I've not seen anything sent out to us that they were looking at doing that in the first place. They're not making it public knowledge at the local levels."
Local governments now get the loans at low costs, according to Georgia Budget and Policy Institute Deputy Director Sarah Beth Gehr. The state holds the loan portfolio and the repayments provide a stream of revenue to the state over the years. Selling those loans on the market means an outside party gets involved.
"The state is proposing selling that stream of cash -- the loan repayments -- to private investors," Ms. Gehr said. "The private investors will give (the state) hundreds of millions of dollars, and the private investors will take on the stream of cash as the loans are repaid from local governments. The state gets a one-time shot at funds and sells off an asset."
A spokesman for Gov. Perdue's office said revenue from selling the loans will strengthen the state's crumbling budget. Gov. Perdue has proposed cutting $1.2 billion from the 2010 budget to offset revenue shortfalls.
"Just like other states, the budget had to be reduced last year," said Chris Schrimpf, the governor's press secretary. "Monetizing a stable portion of GEFA would allow us to see an influx of over $240 million in funds that we can use this year to prevent cuts to education, public safety and health care."
But an organization that represents Georgia's 159 county governments worries about the impact on local projects.
"Since the mid-1980s, local governments have relied on GEFA in providing low-interest water and sewer loans to our communities and taxpayers in Georgia," said Todd Edwards, the associate legislative director for the Association of County Commissioners of Georgia. "Anything that jeopardizes the ability of this program's future is of great concern."
Like Mr. Ashburn, he fears local governments might face interest rates for infrastructure projects.
Mr. Edwards said there is no bill now being reviewed in Atlanta on the private investment issue, but he fears future legislation could institutionalize the practice of selling loans.
"This really comes back to the taxpayers and ratepayers in Georgia," he said. "If local governments can't get GEFA loans, where are they going to go?"
Russ Willard, spokesman for the state attorney general's office, said two attorneys who advise the environmental facilities agency provided counsel on two issues surrounding the proposed loan sale -- the legality of privatizing loans that originally were funded with state bond money and what happens to a local government's obligation to repay loans when a portfolio is sold.
GEFA spokesman Shane Hix said the attorneys advised the agency to continue working with communities to obtain payments on time, but the other issue remains unresolved.
"The legality that has to be addressed with legislation is the ability of GEFA to voluntarily transfer the funds from the sale of the portfolio back to the state treasury," Mr. Hix said. "So there is some legislation needed."
According to Mr. Hix, Georgia citizens have invested more than $530 million in tax dollars toward GEFA since 1987.
The agency also administers about $862 million in two federal programs -- the Clean Water Program and Drinking Water Program -- but Mr. Hix said that money is not included in the asset sale.