Maverick County approves issuance of $2 Million Tax Anticipation Notes
By: Jose G. Landa, Eagle Pass Business Journal, Inc. Copyright 2015
Maverick County Commissioners Court unanimously approved the issuance and sale of the Maverick County Tax Anticipation Notes Series, 2015, for $2,000,000 or less, levying a tax in payment thereof, approving a note purchase agreement, private placement agreement and a paying agent/registrar agreement at their meeting held on Monday, July 13, 2015.
In other words, Maverick County is going to borrow $2 Million in the form of Tax Anticipation Notes in order to pay the County’s budget for the remaining months of July, August, and September 2015 due to a budget shortfall. Maverick County’s Fiscal Year 2014 closes on September 30, 2015.
One of the principal cause for the budget shortfall is the significant cost to operate and manage the 625 Bed Maverick County Detention Center owned by the Maverick County Public Facility Corporation, an instrumentality of Maverick County.
During discussion of agenda item No.25, Maverick County Judge David R. Saucedo advocated for the issuance of such notes due to a funding shortfall for the fiscal year 2014 due to certain circumstances such as the expensive costs of operating and managing the Maverick County Detention Center, among other issues.
Maverick County Financial Advisor Raul Villasenor of First Southwest Capital of San Antonio, Texas presented an analysis report to Commissioners Court, detailing cash flows of Maverick County’s budget through September 30, 2015.
“We have been asked to analyze the various deficits that are projected to occur,” said Raul Villasenor.
Villasenor presented a summary of the County’s revenues versus its expenses and where the expenses exceed the revenues.
“We are projecting deficits for the months of July, August and September of 2015,” reported Villasenor to Commissioners Court.
Villasenor presented the upcoming fiscal year tax collection history schedule of Maverick County, detailing a positive cash flow for the County in the month of October and then negative cash flows for December and January of 2015.
“This analysis does not anticipate any tax increase. It is just simply looks at the straight line cash flows of the county,” noted Villasenor.
“We are projecting through January 2015 that the County will incur $1,541,595 (Million) in negative cash flow,” said Villasenor.
Villasenor’s analysis determined that Maverick County will have deficits in 5 of the last 7 months of the 2015 fiscal year.
“This is coming with the expenditures that the county is expecting,” said Villasenor.
“For the months of July, August and September, we will assume that the County continues to cover the deficit at the Maverick County Detention Center (MCDC), that is approximated to be $400,000 a month,” said Villasenor.
Villasenor advised Commissioners Court that currently Maverick County continues to be in negotiations with the Maverick County Detention Center’s bond holders. These negotiations with the Bondholders are secretive and not privy to the public, contrary to the Texas Open Meetings Act. Maverick County taxpayers are clueless as to the status of the negotiations with the Bondholders and whether there is any possibility of restructuring the debt and obligations of the Maverick County Public Facility Corporation. Depending on the results of the negotiations, Maverick County taxpayers may be facing greater bad financial news and obligations of the County or may obtain relief from this multi-million debt ($43 Million).
Maverick County has to make at least a $1.05 Million payment on August 1, 2015 on the Maverick County Detention Center. Unless Maverick County obtains the $2 Million loan, there is the possibility Maverick County may fail to make this August 1st payment. There is the possibility that Maverick County may have to stop operating and managing the Maverick County Detention Center due to its high operating costs and monthly bleeding of the County’s General Fund to subsidize it at taxpayers expense.
Although Commissioners Court has slashed the operating costs of the Maverick County Detention Center to bare minimum over the past months, the monthly operating costs remain greater than the revenues being generated with its contract to house U.S. Marshal’s Service pre-trial detainees from the federal court in Del Rio, Texas.
Many inmates at the Maverick County Detention Center are unhappy and complaining about the drastic reduction of services and medical care at the detention center due to Commissioners Court budget cuts there, raising the possibility of risks to staff and inmates from potential riots or violence by inmates due to their inconformity.
Villasenor reported to Commissioners Court why the deficits are larger for the months of July, August and September of 2015.
“This are the only 3 months where we included the county covering operations and maintenance (O&M) at the MCDC. So, even if you remove those $400,000 you still end up with a negative cash flow in July, August and September,” said Villasenor.
Villasenor advised Commissioners Court that through the tax anticipation note ($2 Million) being proposed, Maverick County can cover the shortfall of cash flow being seen for these final three months of July, August, and September.
“We also feel that in part we will be able to replenish the general fund balance that is pretty near zero with $400,000,” said Villasenor.
Villasenor estimated that the cost of issuance for the $2 Million tax anticipation note would be approximately $60,000 with a principal amount of $2,000,000 in total. This total does not include interest to be accrued from the tax note.
Judge Saucedo stated that replenishing the general fund to a certain extent was taken into consideration during the analysis to issue the tax notes, alleviating any burdens from the potential negative cash flows in the first upcoming months of the new fiscal year of 2015.
Saucedo stated that he felt that all the issues being seen with the deficits and the bondholders were going to go well. Saucedo cautioned, however, that Maverick County has to be wary and conservative in a sense and approach things with the mindset that things could go wrong.
“This numbers that you see are anticipating that we won’t work out a deal (bondholders of the MCDC),” said Judge Saucedo.
Judge Saucedo acknowledged Commissioners Court for their efforts in working with what is there and cutting back a large amount of funds going to fund the operation and maintenance of the Maverick County Detention Center since the County took over its operation so that jobs wouldn’t be lost. Approximately 120 persons are employed at the Maverick County Detention Center.
