Fiscal Court backs KU bond requests

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By Sharon Graves


The News-Democrat

Carroll County Fiscal Court on Tuesday, Sept. 23, approved several ordinances to help Kentucky Utilities secure funding for upcoming projects.

Spencer Harper, an attorney for KU, explained to the court the various ordinances KU was asking for.

By a 3-1 vote, the court approved on second reading an ordinance asking the county government to authorize the issuance of bonds for KU. The county’s approval is needed for KU to receive the bonds; however, neither the county nor its residents are directly responsible for repaying the bonds.

Harper, who also attended Fiscal Court’s Aug. 26 meeting for the first reading of the ordinance, said the ordinance explains that KU is seeking nearly $78 million in bonds. Nearly $60 million will be used to re-fund four other bonds; the remaining $18 million will be used to install a new scrubber at the Ghent generating facility.

The scrubber is mandated by federal regulations, and the money must be borrowed, Harper explained. Bonds allow KU to borrow the money at a lower interest rate, thus saving its customers money. Commercial loans charge higher interest rates, which would force KU to pass the extra costs to the consumer, Harper explained.

Two other ordinances were presented for a first reading.

The first would authorization KU to issue re-funding bonds in the amount of $96 million. The money would be used to refinances bonds dating back to 1980, originally purchased for air- and water-pollution control and solid waste disposal facilities at the Ghent plant.

The second asked for the termination of bond insurance policies on several other bond issues.

Harper said eliminating the insurance is not a risk. “KU is a very very stable company and will never not be able to pay their bills.”

Additionally, the move could save KU customers money down the road.

He explained that insurance companies that have bought bad loans for investment have seen their ratings drop in the current financial crisis.

This makes the people who invest in the type of bonds KU uses to finance it’s projects shy away from investments that carry bond insurance from certain companies, explained KU treasurer Dab Arbough.

“Companies that have been insuring sub-prime mortgages have had to pay out a lot of money,” Arbough said. “As a result of that, investors buying those bonds are concerned these insurance companies won’t be able to pay [if there is a need]. So they are going elsewhere to buy bonds that don’t have insurance.”

Magistrate Dean Miller cast the sole vote against each of the ordinances. He also voted against the first reading of the first bond ordinance on Aug. 26.

Miller told the KU representatives that he was still very upset about the length of time it took for KU to restore power in Carrollton after Hurricane Ike last month.

“Consumer confidence is very low right now. How can I explain that this is a good thing to do,” Bates said to Miller. “This is out of the ordinary for everyday people.”

County attorney Jim Monk said he also believes KU’s requests are sound.

“Bonds backed by insurance are suspect because of their bad rating at this time,” he said. “This is a never-ending process, but these are not your [fiscal court’s] obligations.”

He said that when the original bonds were issued in 1980, KU got a cheaper interest rate with insurance. “But now, because everything has been turned on its head, it’s cheaper without it.”

Judge-Executive Harold “Shorty” Tomlinson and Magistrates Floyd Bowling and Mark Bates all voted in favor of the second reading for the first ordinance and the first reading for the two additional ordinances.

In other business: Tomlinson said a private auditing firm will begin its audit of Fiscal Court next week.

The county has entered a contract to buy 600 tons of road salt at $59.63 per ton, Tomlinson said.

“Deliveries are running behind because of the hurricanes, but we probably have 100 ton on hand,” he reported.

Acting Carroll County Clerk Patti Mefford presented the tax rates for the county for 2008 to the court.

The follwing are the taxing district rates for the 2008 tax year:

County, Real Property per $100 assessed value, 4.99; County, Personal Property per $100 assessed value, 15.3; Health Dept, All Property per $100 assessed value,  5.4; Library, Real Property per $100 assessed value, 8.4; Library, Personal Property per $100 assessed value, 9.49; School, All Property per $100 assessed value, 50.0; Ghent Fire Protection District, All Property per $100 assessed value, 8.7; State, Real Property per $100 assessed value, 12.2; and Fire Acre Protection per $100 assessed value, 2.0