The McCreary County Fiscal Court took action to deal with past-due loans through the County’s revolving loan program, after a 32-minute executive session Thursday night.
The program was designed to provide local small businesses with a low-risk loan at affordable interest rates in an effort to promote growth and job creation.
But since its inception the program has been a boondoggle for local government as several past loan holders have not kept current on their payments.
The Fiscal Court first entered the closed session to discuss possible litigation regarding the loans.
After resuming the open court meeting, Judge Executive Doug Stephens stated the Court had been approached by two loan holders who offered a settlement on their loans.
The Court voted to reject the offers, instead opting to take a different tact that will allow all past due accounts an opportunity to reconcile their loans.
Magistrate Roger Phillips forwarded a motion to give Judge Stephens the authority to enter into negotiations with outstanding loan holders in the hopes of bringing all past due accounts up to active status.
Judge Stephens will be able to offer the account holders a new ten-year loan structure at the lowest interest rate offered to other accounts. If they accept the terms, they will be able to resume regular payments until their account is paid in full.
That authority to renegotiate will last six months, after which, all outstanding loans from that point on will be published in the newspaper, similar to outstanding property taxes, and legal action initiated against those accounts that have not taken advantage of the offer.
This week Judge Stephens said there are 12 loans his office considers “active” loans. Of those, only three are “current” and making regular payments and are on schedule. Four are “slightly behind,” meaning there have been payments made on a semi-regular basis. The remaining five have not made a payment in a significant amount of time. Judge Stephens said there are an additional four loans that are “older” and predate his administration. He stated he is developing a plan to deal with those loans as well.
The revolving loan program has been a source of frustration for the Fiscal Court almost since its inception.
Early in Judge Stephens’ administration many of the loans predating his taking office were reviewed for possible legal action to collect, but were found to have incorrect or missing paperwork.
Many of those early loans were written off as losses due to the oversight or otherwise deemed uncollectable due to bankruptcies or the closure of the business.
A new Economic Development Council was created in 2012 with one of the main charges of the group being the review of new applications for the program. Loans reviewed by the Council are forwarded to the Fiscal Court for final approval.
A 2012 audit of the Fiscal Court noted poor management of the program, including lack of internal controls and accounting. That criticism has been consistent in subsequent audits, despite repeated assurances that steps were being taken to update the program.
The 2012 audit listed 21 businesses participating in the loan program, with eight showing no payments since 2008 carrying over $182,000 in past due payments.
A report in November of that year showed the county was owed more than $750,000 in overdue loans from 14 account holders, with the majority of them ranging from the years between 2005 and 2007.
At that time then-Economic Development Director Susan Stephens said she was taking steps to contact the loan holders in an effort to encourage them to resume payments.
Though there was some initial success in reconciling a few of the accounts, the majority did not respond, and the loans remained uncollected.
In 1994 McCreary and Scott County, Tennessee formed a Rural Enterprise Community with the intention of enhancing economic development. The Scott-McCreary Area Revitalization Team (SMART) approved low interest loans to eligible businesses through the U.S. Department of Health and Human Services.
In 1998 McCreary County was also awarded funds through the Rural Business Enterprise Grants (RBEG) from the U.S. Department of Agriculture to also issue similar loans. The county combined the funds in 2011.
In other Fiscal Court action: The Court approved the second reading of an ordinance officially disbanding the McCreary County Airport Board, and passed a resolution creating an Airport Advisory Board.
According to Judge Stephens, Judge Stephens and each magistrate will nominate one citizen (preferably from their district) to serve on the Board. One magistrate will also be asked to serve on the Board in an ex officio capacity, meaning they will not have voting privileges.
The Board will serve to develop and administer projects relative to the operation, maintenance and growth of the airport, as well as developing the operating budget and managing the facility.
The Board will serve in an advisory capacity only and any financial disbursements relating to the airport will come from the Fiscal Court.
Judge Stephens asked the magistrates to nominate their candidate prior to the next meeting of the Fiscal Court.
Magistrate Roger Phillips asked Occupational Tax Administrator Stephanie Tucker for an update on outstanding balances in the OC Tax fund.
Tucker said 51 individuals have taken advantage of an amnesty offered by her office and have begun making regular payments, but there are still about 260 past due accounts.
County Attorney Conley Chaney said he needed direction from the Court on how to proceed with legal actions regarding the overdue accounts.
He stated the County could use a collection agency, which could charge up to 50 percent of the collections in fees.
He suggested issuing civil summonses against the accounts, first taking a random sampling of about 50 individuals to start the legal process. He stated by doing that it would not only ease the burden on his office and the court system, it would also send a message to other past due accounts that legal action is forthcoming and may encourage them to start payments.
The Court also approved the hiring of several individuals on a part time as needed basis for 911 Dispatch, McCreary County EMS and Transport Office.
It also approved the purchase of a new Caterpillar grader for $160,306 through LGEA funds for the County Road Garage.
The next meeting of the McCreary County Fiscal Court will be on January 14.