Normally, what happens in Washington, D.C. attracts little attention from the Lowndes County Board of Supervisors as they handle the business of the county.
But in their other role, as the trustees of the Hospital Trust Fund, supervisors will be watching with great interest as Congress addresses a tax reform package that could have a dramatic, even if temporary, effect on the county’s trust fund investments.
Wednesday, supervisors received an update on their investments from representatives of Renasant Wealth Management and Stephens Capital Management, the two firms that manage the county’s trust fund investment.
The good news: As of today, the county could withdraw almost $1 million in earnings from their investments. The bad news: It can only withdraw based on the value of those investments as of Dec. 31, 2017. The uncertain news: Failure by Congress to pass tax reform could lead to a dramatic dip in stock values, which could take a big chunk of that anticipated $1 million profit.
“This week, next week and definitely before Dec. 12, we will see if the tax reform is going to happen,” Allison Youngblood of Renasant told the trustees. “Because of what’s going on in Alabama with the Senate race, I think they’ll try to get this passed before that special election because there may not be enough votes to pass it depending on that outcome (if the Democratic candidate wins).”
The proposed change in the corporate tax rate in the plan — from 35 percent to 20 percent — could spark a boom in the market.
“Every 1 percent decline in the corporate tax rate will generate, hypothetically, $1.31 in earnings,” Youngblood said. “If they get that 15 percent reduction, we could be looking at earnings increasing, on average, $19.64 per share.”
And if the tax reform fails?
“If it doesn’t happen or if it gets postponed, you’re going to see the market react to that,” she said. “So this is something we’ll be watching carefully over the next few weeks.”
As of Wednesday, Renasant’s portfolio has shown a year-to-date increase of $483,397.58, a gain of 7.06 percent. Stephens Capital showed a 3.64 percent increase.
Combined, the current value of the trust fund is $33,064,198. State law allows the county to withdraw up to 3 percent of the fund’s profits based on the value of the funds at the end of the year. As of today, that would allow the county to withdraw $992,000 while growing the corpus (or untouched principal) from $31,540,000 last year to $32,073,000.
Even with the uncertainly accompanying the final 45 days of the year, county administrator Ralph Billingsley said the county’s ability to invest in stocks and bonds, approved by the state legislature in 2013, has been a windfall for the county.
“In 2012, the year before we were allowed to get into the market, we earned $51,000 on that $30 million fund,” Billingsley said. “If its investments end up like they are today, we will have been able to withdraw $3.9 million in investments while growing the balance by another $2.1 million, all in the past four years and three months. That’s $6 million. It’s just been a great investment for the people of Lowndes County.”
Slim Smith is a columnist and feature writer for The Dispatch. His email address is [email protected].
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