Fulton County’s plan to refinance nearly $140 million in debt left over from 1990s-era Grady Memorial Hospital improvements will help stave off painful service cuts and keep the tax rate down, but some say it’s jeopardizing the county’s future for the sake of a present quick fix.
The deal spares Fulton an upcoming payment and knocks $17 million off next year’s projected deficit, but beginning eight years from now taxpayers will make up for it, when payments leap from $9 million to $16.7 million within a single year, and for the following seven years.
“It’s delaying the inevitable,” said north Fulton Commissioner Liz Hausmann, one of two votes against the refinancing. “I just don’t agree with kicking the can down the road.”
Unless the real estate market improves and property tax revenues return to old levels, any sharp increase in costs could force a future County Commission to do what the current one wants to avoid — raise taxes, slash services or lay off scores of employees.
In the meantime, though, the deal frees up millions in cash flow and gives the county time to adjust spending without drastic measures.
“This is literally buying you time to right-size the ship,” said David Corbin, managing director of Terminus Securities, which is underwriting the bond issuance.
Commissioner Robb Pitts, who has balked the loudest, calls it a “financial scheme” that is “bad, bad, bad public policy.” Under the current payment plan, the debt would be paid off in 2022. Now payments will continue until 2028 and cost more than $32 million extra.
“I’m not even sure all my colleagues knew what was going on,” Pitts said.
But commission Chairman John Eaves said the panel has to focus on problems in front of them. “My view is more of the here and now,” Eaves said, “in terms of what we have to do to manage our responsibilities and our obligations, given the challenges here today.”
Tax billings are down by $75 million, Finance Director Patrick O’Connor said earlier this month. He advised the commission to raise the tax rate earlier this year to make up for dwindling revenues, but facing public opposition, the panel declined.
Even with $17 million taken off next year’s bill, the commission must still find $37.1 million in cuts to balance the books for the budget year beginning January 2013.
Some options include furloughing workers, suspending building projects, scaling back grants to arts groups and cutting library hours.
The Grady debt dates back to 1993, when Fulton and DeKalb counties issued $336 million in bonds to fund a massive renovation and expansion project. The two counties are the hospital’s biggest benefactors, contributing tens of millions of dollars each year to cover costs of treating poor and uninsured patients — the majority of them being from Fulton.
DeKalb isn’t planning to extend its payments in the refinancing. Its $7.7 million per year payments end in 2020. If the county participates, it could save about $400,000 per year, still retiring the debt in seven years, but the commission hasn’t voted on the issue yet.
DeKalb’s credit rating has taken hits recently, and it could opt to wait a year in hopes of a better deal if its rating is restored.
This is the fourth time Fulton has refinanced its portion of the debt.
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