January 31, 2013 10:23:44 AM
Jeff Clark - [email protected]
A pair of House bills sponsored by Jeff Smith, R-Columbus, will allow the Lowndes County Board of Supervisors to invest the $30 million the county received from the sale of the county hospital in 2001.
House Bills 997 and 998 would create the Lowndes County Reserve and Trust Fund, with the board of supervisors serving as its trustees. The bill is based on similar legislation written for Lafayette County.
The bills would allow the county to place the funds in various interest-bearing investments. Up to 85 percent of the interest would go into the county's general fund, and up to five percent of the principal could be used with a majority vote for "emergency situations."
Smith did not respond to requests for comments on this story.
"We have not spent any of the principal money," said Lowndes County Administrator Ralph Billingsley. "We have only spent the interest or earnings. As the state law currently dictates, we can only place the money in a certificate of deposit or buy some state bonds with it. When it was first placed in a CD, we were drawing 5.2 percent interest. Now, we are getting 0.19 percent interest. Basically, we are losing about $1.5 million a year."
Billingsley said the interest money had been used for variety of things, including the Columbus Soccer Complex and the construction of the new Lowndes County Health Department. But he said the low returns on CDs have made the earnings almost non-existent.
One of the reasons Billingsley said the county asked Smith to bring legislation before state lawmakers is that forming a trust will allow the county to use the interest money to purchase tax liens at the annual county tax auction in August. The income from tax liens produces far more revenue than the county's paltry return on its CDs.
"By participating in the tax auction, we could see an annual return on the investment of up to 18 percent," Billingsley said.
District 1 Supervisor and board president Harry Sanders was instrumental in selling the county-owned hospital to the Baptist Hospital group. Sanders said he watched as the interest on the county's CD dropped from 5.2 percent to 3.8 percent to its current rate.
"Banks didn't want the money," Sanders said. "If you put in $30 million, they have to pay a premium on the insurance and they ended up paying more than they are paying in interest. It's been very difficult to allow the hospital sale money to make earnings. The current state law won't let you invest in anything that's not backed by the federal government and those investments aren't making any returns."
Sanders said he has fought to keep the principal money intact.
"When we were first sold the hotel, there were some people in the community who felt the money should be used for health care," Sanders said. "There have also been some supervisors who have wanted to spend some of the principal. We didn't even spend any of the interest for a few years. The first thing we used it for was a new health department."
With tax sales yielding up to 18 percent earnings annually, Sanders said investing in property tax sales is a safe investment.
"We have these big investment banks buying these properties," he said. "What happens is, if people don't pay the taxes after two years, you own the property and you bought it at the tax rate. It's a very safe way for us to invest our money."
Although the board is advocating for legislators to change the law, Sanders said it could be an uphill battle for the county.
"A lot of legislators don't want the county getting into the property business," Sanders said. "But we aren't getting into the property business, we are just trying to purchase some tax liens. I can't think of a better or safer investment for the county."