GOSHEN — County leaders on Saturday agreed not to raise the interest rate on money the county lends itself for major projects, but may reconsider in the future.

Elkhart County Council reviewed four existing loans taken out of the Major Moves Fund. The fund was created using money from the one-time disbursement the state made to local governments in 2006 after leasing the Indiana Toll Road.

Instead of spending its share, the county has been using it to fund public projects while charging itself interest, which is currently 2 percent. The revolving loan fund had just under $25 million in it when it was first used in 2008, and is on track to eventually reach $75 million.

"You can research the rest of the counties — you won't find anybody who's doing what we're doing," said Councilman Dave Hess, who helped manage the fund in his time as county auditor. 

Council members have been asking themselves in recent months if they want to raise the interest rate, to be closer to what the county could earn by investing the money in other ways. They decided Saturday to hold off, for now, with one councilman saying there's no true gain when it's taxpayers who are ultimately paying the interest.

"It's really a zero-sum game," council member Doug Graham said. "If you charge more interest you have to pay more taxes."

Gaining interest

The four projects reviewed Saturday include the construction of the Six Span and Johnson Street bridges, the reconstruction of C.R. 17 and the Kercher Road bridge, the re-routing of the highway in Bristol to bypass the downtown area and an upgrade to the communication system at the 911 dispatch center.

The two bridges are down to $5.3 million outstanding out of a $19 million original loan amount, and are expected to be paid off in 2023, said county attorney Craig Buche. The work on C.R. 17 and the Kercher bridge was funded by a $9.8 million loan, which now has a balance of about $6 million and is on track to be repaid by 2027.

Bristol can borrow up to $3 million under a deal approved one year ago, which it will repay over time with Tax Increment Finance District funds. The 911 communication upgrade was approved late last year, at a cost of $3.6 million, and has a repayment schedule of 10 years, Buche said.

Council started looking at the possibility of raising the 2 percent rate around the time they approved the Bristol loan, with an agreement that specified the town would pay the same rate as county departments. The county treasurer's office found it could be earning 3.5 percent interest if the money were put into a certificate of deposit.

After crunching the numbers, Buche determined the larger loans would earn an extra $30,000 to $80,000 over their lifetime for every quarter-percent rise in interest. But he noted the current interest rate is enough to grow the fund and meet a $75 million goal by the time the lease expires.

"So it is at a rate that will be adequate to meet those needs," he said. "Obviously for each increase you would make, you would be impairing or impacting the other funds for other projects."

Hess said he was comfortable leaving the interest rate where it is for now. Councilman Tom Stump agreed, but said they should consider a higher rate for any new loans in the future.

"If we were going someplace else or somebody like Bristol was going someplace else, they couldn't get a loan for 2 percent," Stump said. "I think anything we can do to increase our fund balances, that's what we should be thinking about because my experience with the state, and actually paying attention to what they do, is you can't really know what they're gonna do."

'We can afford it'

Goshen resident Glenn Null came forward to encourage council to raise the interest rate. He said he felt he was being cheated otherwise.

"If you guys would pay attention to your credit card, and what the interest rate is, it's based on what the (Federal Reserve) does plus whatever amount that they want to gouge you at. I would like to see these loans set up that way," he said. "We're not gaining so that means we're losing."

Council members pointed out that the loans are internal, so the county doesn't end up with any less money, and that departments could be losing money if the funds weren't available and they had to turn to an outside source for a loan.

Councilman Darryl Riegsecker said he agreed with Stump, and pointed out that they don't necessarily have to charge the same interest rate to entities outside of county government. Hess asked whether the county wants to be the bank for any other municipality.

Stump observed that, for the relatively small amount that was needed, the loan made more sense for Bristol than paying administration costs on a bond. 

"I don't see anything wrong with loaning municipalities, Redevelopment Commission, moneys, at least municipalities in the county," he said. "They're part of the county, they're taxpayers. ... It does them a favor as well as us. I don't mind doing that, as long as we can afford it. That's a good endeavor for us, I believe."

Hess concluded that they would leave the rate alone, but noted that the loans are reviewed every six months so they could discuss the issue again in December.

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