Hamilton County Commission votes to seek credit line

photo Hamilton County Commissioners during a commission meeting in this file photo.

In other business, commissioners:• Accepted a proposal from DigiPoint Solutions to scan and digitize Juvenile Court documents.• Agreed to sell a lot in Centre South Riverport Industrial Park to Southeast Mahindra USA for $561,000.• Agreed to enter an agreement with CSX Transportation for railroad crossing improvements at the Tennessee Riverpark in St. Elmo.• Appointed Dr. Steven Cogswell as associate medical examiner of Hamilton County.

Hamilton County government is changing the way it handles short-term debt after commissioners voted Wednesday to seek a $90 million credit line.

The measure is a signal that the county is stepping away from its commercial paper program -- at least for now -- in favor of more flexible credit to finance short-term capital projects.

After a back-and-forth among Mayor Jim Coppinger, staff and commissioners, the measure passed unanimously. But commissioners say they want to "closely watch" how the credit line is used.

"As we issue the debt, we want to know where the money is coming from to pay that debt," Commissioner Fred Skillern told county finance department staff.

Skillern leads the commission's finance committee.

The short-term debt likely will be converted to a long-term bond when the time is right, said Coppinger.

Credit interest rates are generally more volatile than bond ratings, but right now they are lower.

"In the event that we see a spike in the interest points, that's where we will be out trying to convert this into long-term debt," Coppinger told commissioners.

Hamilton County Auditor Bill McGriff said the credit line would allow the county to take advantage of lower construction and timber costs when they happen.

But the resolution only gained full support after Skillern added an amendment that narrowed the county's ability to convert the credit debt to long-term bonds.

Under the original resolution, the county could convert the debt to bonds with interest rates up to 12 percent.

Assistant Administrator of Finance Al Kiser told commissioners the large range was there to ensure the county could get out of the credit market quickly if needed.

Commissioners Warren Mackey, Skillern and others balked at the possible double-digit rate.

"That's not protecting me," Mackey said.

Skillern's amendment, which passed unanimously, lowered that top interest rate to 4 percent.

But that might make things difficult for the county if the variable rate on the credit line does spike, and bond interest rates are above the 4 percent mark.

Kiser said if that happened, the county would have to keep debt in the higher interest credit line until the commission could pass another resolution -- and then wait 20 days for public notice.

Depending on credit interest rates -- and the balance on the credit line -- those 20 days could be costly.

Wednesday's vote was only the initial resolution for public notice on the resolution. After 20 days, Coppinger will return to the commission for the credit line to be bid to financial institutions.

Contact staff writer Louie Brogdon at lbrogdon@times freepress.com or 423-757-6481. Follow him on Twitter at @glbrogdoniv.