Monday, October 1, 2012

Light at the end of the tunnel

At a special called meeting on September 24, Goochland’s supervisors considered a plan to refund the Tuckahoe Creek Service District debt. There finally seems to be a light at the end of the TCSD tunnel and it is not an oncoming train.

Unlike the previous regime’s “it’s not our problem” approach to TCSD development and debt, this board understands that the TCSD will be either the county’s salvation or downfall, and prefers the former option.

County Administrator Rebecca Dickson explained that, since taking office in January, the supervisors put the highest priority on finding flotation devices for the TCSD debt anvil.

To that end, a complete set of fresh eyes were put on the problem.

This team is comprised of: District 5 supervisor Ken Peterson, who brought extensive high level professional experience in negotiating debt restructuring to the task; county staff including Dickson and John Wack, deputy county administrator for financial affairs; bond counsel, Kutak Rock; and financial advisor Public Financial Management.

New VRA members receptive to Goochland’s efforts to deal with its debt also made the proposed financing changes possible.

In a major attitudinal shift from the old regime, the new board has embraced a full speed ahead approach to economic development that includes: hiring Matt Ryan as economic development director; dedicating resources for a Goochland-centric economic development website, which is expected to be in operation by Thanksgiving, and working closely with the state, major landowners and anyone else who can bring businesses to Goochland.

Dickson said that other initiatives to mitigate TCSD issues are being explored by the county. These include selling water to “another party” to increase water usage, and increasing the size of the TSCD. Adding land and users to the TCSD will spread the cost of operating and maintaining the county’s utility system.

Taming the enormous debt, however, will go down as one of the most significant actions of this board.

For reasons lost in the mists of time, and conveniently forgotten by those involved, the county entered into an unusual, some might say peculiar, agreement to borrow $62.7 million from the Virginia Resources Authority (VRA) in 2002.

Dickson characterized the 2002 TCSD financing package as “quite unique,” depending on a large amount of economic development, which “never came.”

Among the many problems with the initial deal, was that the county failed to comply with a requirement that the maximum annual payment, $9 million, be set aside in a reserve. Goochland never had that, said Dickson.

High level discussions about the existing bonds and ways to reshape the debt have been ongoing for most of 2012. Several scenarios, said Dickson, were “developed, vetted, altered and vetted again” before the final proposal emerged.

The proposed restructuring will extend the life of the debt for five years, but reduce the annual payments to around $6 million. Portions of the debt are callable and will be replaced with newly issued bonds taking advantage of the currently favorable interest rates.

West Creek principal Tommy Pruitt congratulated the supervisors on the debt plan. “None of you were there at the creation of this unique mess,” he told the Board. “You were elected to solve problems.”

Pruitt explained that uncertainty about the ad valorem tax discouraged business activity in West Creek because it was impossible to provide long range tax cost projections. He noted that the proposal has Peterson’s “fingerprints all over it” and, while not the total solution, is a great start.

Board chair Ned Creasey District 3, commended the team for its efforts. “You did the undoable,” he said.

Dickson said that the restructuring will spread out the debt payments, providing time for the TCSD to grow. She said that they hoped this would make it possible to hold the ad valorem tax at 32 cents. No mention was made of a reduction in water and sewer rates or the ad valorem tax, although that may happen as both the value of the TCSD and number of utility customers increases.

Creasey also said that, because Goochland is morally obligated to pay off the debt, he could not promise that the entire county would never be saddled with debt service costs.

This is a good indication that the board is basing its decisions on factual, current data, not wishful thinking. The use of conservative growth assumptions also bodes well for its success.

The strategy that will be used to accomplish this feat, which many believed was impossible, is quite financially sophisticated. Details may be found on the supervisors’ section of the county website

A resolution on this initiative will be voted on by the board tomorrow evening, October 2, during the evening portion of its regular monthly meeting. The session will also be available via live streaming over the internet.

Although there is ample blame to lay at the feet of those who created the unique mess of the TCSD, this board has chosen to fix the problems it inherited and work toward a better future. Other levels of government could learn from events in Goochland.

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