Friday, September 9, 2016

Knox Co. to loan itself $5 million

Knox County is looking at potentially taking out a $5 million loan in early October to pay for general operations and the school system, which has depleted the reserve dollars it can use to dangerously low levels.

The catch?

Knox County will essentially borrow the money from itself.

Officials, however, stress that the county has plenty of cash but the bank accounts ebb and flow as tax revenues come in and later are spent.

The county’s reserves technically stand at about $60 million.

The school system’s reserves stand at around $15 million, but officials can’t touch most of that.

State law requires local school systems to set aside a reserve fund of 3 percent of their respective operating budgets. If they fall below that number, the state could take over managing the school system’s finances.

More than 10 years ago, then-Mayor Mike Ragsdale gave the Development Corporation of Knox County millions of dollars to purchase land. Since there’s still money left, the Development Corp. – if needed – will lend the county up to $5 million.

The county would then reimburse the corporation by early next March. The interest would cost the county about $5,400 altogether.

The county also could sell bonds to cover costs but officials are against such a move.

The County Commission will talk more about the matter during its Sept. 19 meeting.

“Financially, it’s more to our benefit to get a loan than it is to liquidate our assets,” said county Finance Director Chris Caldwell.

Caldwell, who has worked in the county’s finance office since 2002, said he can’t recall the county ever taking out a loan.

He said last year the county did liquidate some investments but actually made a gain when it sold bonds.

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