Citizens for Better Government
Blount County Tennessee
Mayor and Commission fail to explain millions
wasted in shady bond deals
Several months ago, Mayor Cunningham and the Commission, after denying that the County had a debt problem, decided to hire a consultant to help the County fix the debt problem. A thorough investigation into the millions of dollars that seem to have been wasted in the County’s highly questionable debt transactions is desperately needed. Unfortunately, the Mayor and Commission hired a consultant that is a defendant in a major lawsuit that describes many of the questionable municipal debt practices that have cost the County millions. Let’s review the facts we know.
Now let’s consider some answers the taxpayers deserve. For example:
· What was the effect of the conflicts of interests in these deals? Often, the person advising the Commission left the room, put on a different hat, and collected hundreds of thousands of dollars in fees resulting from the advice he had just given. Was it wise to permit this kind of arrangement? What did it cost the County taxpayers?
· Where did the millions of dollars in debt fees really end up? Who got the money? Were these fees competitive and reasonable? Did the County have adequate safeguards in place to prevent our taxpayer money from being ripped off?
· What exactly did this firm without a phone, or its own place of business, do for the County? How much money did they get paid? Who negotiated the contract with that AMAZING compensation clause? Who did the financial review? Who did the legal review? Who renewed it four times?
· Were the termination risks of the swaps disclosed? If they were, why weren’t these risks disclosed to the Commission and the public? Who knew of this $13 million expense, and when did they know it? If no one knew, was this failure to disclose a violation of the law? Should the County be seeking return of this money in the Courts?
· Why were all $93 million of our swap agreements renegotiated, twice, without any public discussion with the Commission? In 2006, major changes were made to the terms of these swaps. The swaps were again renegotiated last September. Other counties demanded, and received, detailed public information about the renegotiation of their swaps, but the Blount County Commission and our citizens were kept in the dark. Why?
· When ALL the costs are considered, would it have been cheaper, and far less risky, to have issued simple, low fee, fixed rate bonds in the first place?
The citizens of the County deserve answers to all these questions, before another dime of their money is spent on debt fees.
· The first step to getting these answers should be a forensic audit, by a major firm, of all our debt transactions. This audit should cover both the County and the PBA.
· With a quarter-billion dollars of taxpayer funds at stake, we cannot TRUST sales pitches. We must do extensive, detailed investigation to get all the facts and VERIFY information.
All this information was presented to the Commission at their March meeting. Incredibly, the Mayor and Commission decided to hire PFM, for a $100,000 fee. The PFM report, issued in April, verified what we have known for more than two years. The County has a serious debt problem.
Unfortunately, the PFM report did nothing to answer our questions about where the millions of dollars of taxpayer money paid in “fees” in these debt transactions, really went.