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County holds debt workshop

In addition to a redistricting plan, Washington County must establish and adopt a debt management policy before the end of the year.
Mayor Dan Eldridge announced the new requirement from the state comptroller of the treasury during the Oct. 11 Budget Committee meeting.
“From a public standpoint, this is a good thing because it ensures transparency and that the proper people are being hired,” he said.
All state and local governments and government entities that borrow money have been directed to draft their own debt management policies by Jan. 1, 2012. Eldridge said some counties have already completed their documents.
A open workshop was scheduled for Oct. 25 to look at sample policies and discuss the requirements in more detail. Four commissioners attended: Joe Grandy, Mitch Meredith, Pete Speropulos and Pat Wolfe.
Eldridge said the comptroller has outlined objectives and principles to include in the policy.
“The objectives are to make the process transparent; address how we will engage the professionals; and address the potential for conflict of interest,” he said.
According to Eldridge, the comptroller sees a conflict of interest in the financial advisor also being the person who sells the bonds. “We need to separate the advisor from the underwriter,” he said.
Principles that should be included in the policy, according to the mayor, are a mechanism to help the decision-makers understand the transaction; a method to clearly communicate to citizens what is being considered, the reason the county is doing it, and the advantages of the structure and risk; what the county will do to avoid conflicts of interest; and disclosure of the costs and risk.
“All seven things have to be incorporated to make Mr. Wilson happy,” Eldridge said.
It also is recommended the policy address the maximum total level of debt the county is willing to assume. This may be based on locally adopted economic indicators, such as per capita debt, a comparison of debt to property values, or debt service as a percentage of revenues or expenditures.
Meredith asked if a detailed debt management plan will help the county with its bond rating, an indicator of the county’s ability to meet its obligations in full and on time. The rating also can be the single most important factor affecting the interest cost on bonds.
“Justin Wilson (state comptroller) said the more deliberate you are in developing the policy, the more it will help you with the bond agencies,” Eldridge said.
Grandy asked if the policy should include a process for selecting a consultant and a bond firm.
Eldridge said it is not required because the county operates under the Purchasing Act of 1957, but thinks it would be good to have in the policy for that very reason. He also suggested the policy maintain some flexibility and not tie the county’s hands.
“Recognizing the state comptroller wants this (the policy) by Jan. 1, I think we need to get it done in the next 60 days,” Eldridge said.
Meredith said meeting the deadline would also say something positive to the investment community.
Eldridge asked the attending commissioners to review the material and return their comments to him by Wednesday, Nov. 2. He will compile the comments and have them ready for another workshop on Wednesday, Nov. 9.
Ideally, the policy would be approved by the Budget Committee during its Wednesday, Nov. 16, meeting. If not, another workshop will be scheduled the following week, with the goal of having it completed by Dec. 1.
The full commission will act on the proposed policy during its December meeting.