Blount County Report

January 2012 Report

by Commissioner Jim Folts

Ex-Mayor Cunningham appointed to the PBA Board - The Public Building Authority (PBA) played a key role in issuing nearly $2 billion in variable rate bonds and swaps for Blount County and 38 other East Tennessee counties and municipalities. A fortunate few got a piece of the millions of dollars in fees associated with these bond tranactions.

Over the last decade the Board of the PBA should have been protecting the interests of the citizens. That did not happen. Problems that should have been identified by the Board, went unreported and contributed to our debt mess.

That makes the record of any new PBA Board nominee very important. The nomination of the former Mayor for this position is very problematic. It was his administration that failed to acknowledge the seriousness of the debt problem. It was his administration, which gave millions in fees to the same person who recommended the failed bond deals in the first place. It was his administration that told the Commission the County could pay off its entire debt in 15 years, even when they knew that we already had debt outstanding until 2039. That was a fairy tale. This nomination by Mayor Mitchell is a disappointment and a disservice to the citizens. Only Commissioner Murrell and myself voted against this appointment.

A major new bureaucracy added to County government – The Commission approved a resolution to ask the state legislature to pass a private act that will result in the addition of another bureaucracy to the County government, called the Smoky Mountain Tourism Authority. It is worrisome that no one seemed able to explain why this Authority is needed. The idea of expanding County government in these tough times is bad enough.

The Commission made things worse by approving a poorly written piece of legislation. Here are a few examples of the problems.

1. The act does not spell out the goals and objectives of the Authority. Should we really be creating a new government agency without any goals and objectives spelled out? If I am a business owner adding a tourism tax to my bills, what assurance do I have that this authority will really spend the money to increase tourism?

2. The act says that the Authority is to be funded with the hotel / motel tax. However, it provides for a penalty of only $50 for willful refusal to collect the hotel tax.

3. Only 3 of the 10 directors of this Authority are elected officials. Once this Authority is launched it will be out of the control of elected officials?

4. The act says there will be 10 members of the Board of Directors. Why are ten directors needed to manage the work of “about seven” people? (Bryan Daniels, who supposedly manages the current tourism effort, could not answer when asked for the number of people he had working in tourism. In answer to the multiple questions on the subject, he finally answered “about seven”. (Click here to see the video clip)

5. The act provides for two Directors each from Maryville, Alcoa and Townsend. What if hotels locate in Louisville, Rockford, Friendsville, or the County at large? This law prevents any possibility of them ever having representation on this Board. The last time I looked, taxation without representation was not real popular.

6. The act provides for six year terms for Directors? Four years is good enough for a president, why not for these Directors? In fact the terms are not even six years, since they get to serve until a successor is appointed, no matter how long it takes. Why this strange setup?

7. This act says that the Open Meetings law applies to this authority. But Section 12 of the act seems to violate the open meetings law by permitting meetings to be conducted: “by any means of communication by which all directors participating may simultaneously hear each other “. No provision is made for the public.

8. The act allows this Authority to float fixed or variable rate bonds for up to 40 years, without any limitations based on the life of the asset. This is part of the reason the County got into debt trouble. This also violates our proposed County Debt Policy.

The larger question here is what motivated a Commission, made up entirely of people who claim to be Republicans, to approve a major expansion of County government. Why did they approve this expansion without even stating the goals and objectives of this new authority. Our business owners and citizens are likely to wake up in a few years to find that we have a new bureaucracy paying an Executive Director $405,000 per year, just like the citizens of Knox County recently discovered. I am sad to say I was the only Commissioner to vote against this nonsense.

Approval of a new Letter of Credit for some of the County variable rate bonds – Recent developments in Europe caused one of the County variable rate bond issues to start to unravel. This made it necessary to spend $55,000 in fees to minimize the damage. Even with that expenditure, the costs of this bond will rise more than $30,000 this year. (The Budget and Agenda Committees were erroneously told this transaction would result in savings.) This is yet another warning that the County needs to get out of the $100 million of variable rate debt it still has.

The banker, who put the County into these failed variable rate bond and swap transactions, was involved in this new Letter of Credit. I asked our Mayor and Finance Director to obtain a letter from this person stating that he did not receive any compensation from any parties to this transaction. We don’t need people continuing to profit from the misery of our citizens. So far, the Mayor has not indicated that he will honor my request.

Mayor Mitchell appoints same people to the Budget Committee – Mayor Mitchell appointed the same members to the Budget Committee who failed to cut the budget last year. Get ready for another major tax increase.

Only YOU can change YOUR government.

PLEASE come to the Commission meeting Thursday, February 16th at 7:00pm in Room 430 of the Courthouse.