VITAL POLICY – Jefferson County’s Debt Examined, An Analysis of Our Collective Credit Card Payments and Wheel Tax

Our collective county credit card is broken up between what is called “County Debt” and “Nursing Home Debt” and “Landfill Debt.” There is a distinction between them because the nursing home and landfill pays their own debt payments from their own revenue. The county taxpayers’ foot the bill directly for all other county debt.

This is a snapshot of Jefferson County’s debt and wheel tax situation as of the date of this publication.

DEBT SUMMARY

Here is a summary of the combined county, nursing home, and landfill debt.

County Debt Principal                                           $38,611,476.32
County Debt Interest                                              $22,786,050.68
State Fees 2024 – 2030                                                 $36,022.83
Estimated Treasury Rebate on School Debt           ($6,921,341.54)

Nursing Home Debt Principal                                $14,575,000.00
Nursing Home Debt Interest                                     $5,250,237.50

Landfill Debt Principal                                              $2,700,000.00
Landfill Debt Interest                                                   $687,886.37

Total Debt (county + nursing home + landfill)      $77,725,332.32

BREAKDOWN OF DEBT AND PAYOFF DATES

NURSING HOME, even though the nursing home pays its own debt, Jefferson County taxpayers would be responsible for paying the nursing home debt ($19,825,237.50, principal + interest) in the unlikely event that it could not meet its payment obligations. Nursing home debt will be paid off in 2050. The nursing home has a stellar record of making its own debt payments.

LANDFILL, the landfill pays its own debt ($3,387,886.37 principal + interest) from its commercial business operation Fund 207, which does not appear on the county debt service revenue or payment schedule. Those annual payments average $260,606.64. Again, in the unlikely event the landfill could not meet its payment obligations, the county taxpayers would be liable. Landfill debt is scheduled to be paid off by 2037. The landfill also has a stellar record of making its debt payments.

COUNTY, the remaining county debt ($54,512,208.29 principal + interest) is scheduled to be paid off in the year 2040.

DEBT SERVICE REVENUE

Jefferson County has a special account called the Debt Service Fund, a savings account of sorts, that is used to pay the county and nursing home debt obligations. The fund is comprised of several sources of reliable revenue. Please note below that the nursing home contributes $931,375.00 this fiscal year to cover its debt payments; and that amount, on average, is slightly lower in subsequent years.

Here is a snapshot of those revenue sources from the current 2023-2024 fiscal year budget.

Property Tax                                                       $2,179,224
Trustee’s Collections                                               $57,670
Circuit Court Clerk / Court and Master                   $50,369
Interest and Penalty                                                 $11,737
Pick Up Taxes                                                             $1000
Payments from Utilities in lieu of Taxes                    $5000
Local Option Sales Tax                                       $2,069,488
Wheel Tax (Motor Privilege Tax)                       $2,300,000
Adequate Facilities Tax                                          $350,000
Bank Excise Tax                                                          $5000
Interest Earned (varies)                                          $225,000
Nursing Home Contribution (varies)                     $931,375
Tax Credit Rebate from Federal Government        $442,656
QSCB Rebate (varies)                                            $484,368

Grand Total Debt Service Revenue                    $9,112,887

With the Debt Service Fund generating $9,112,887.00 of revenue this fiscal year, and the annual county debt payments totaling $5,674,676.00 for this fiscal year, the county government was able to deposit $3,438,212.00 of surplus back into the debt service fund balance. Currently, the debt service unassigned fund balance stands at $14,484,231.00. Traditionally, county commission, from time to time, has used some of that surplus to retire certain bonds early when they become callable to save money on interest.

From year to year, the debt service revenue sources vary slightly depending on the value of the penny of property tax, interest earned, nursing home contributions, and other factors. It is a matter of county commission policy as to what sources of revenue are used as debt service revenue. When the second wheel tax sunsets on April 1, 2024, the debt service revenue will drop by $1,150,000. After this fiscal year, nursing home payments will decrease by $74,094.00 over a 17-year average, reflected in the charts below.

Total Debt Service Revenue for this fiscal year 2023-2024                  $9,112,887.00
Annual Debt Service Revenue after the second wheel tax sunsets        $7,888,793.00

The chart below shows that Jefferson County’s Debt Service fund will generate, on average, nearly 4 million dollars per year above the amount needed to make county and nursing home debt payments. The amounts shown are based on a 17-year average.

Annual Debt Service Revenue (after second wheel tax expires)         $7,888,793.00

Average annual debt payments (County Debt over 17 years)            ($3,206,600.47)

Average annual debt payments (Nursing Home over 17 years)            ($857,281.58)

Average annual surplus, debt service fund                                            $3,824,910.95

The county debt will be paid off in 17 years. At this point, (2040) the only remaining debt will be nursing home debt, paid by the nursing home.

WHEEL TAX

Jefferson County has two separate $25 wheel taxes for a total of $50, charged when vehicle registration is renewed each year. The first wheel tax dates to the mid-1980s with a renewal made in 1999, and the second wheel tax was levied in 2015 when the debt payments temporarily exceeded the revenue in the debt service fund (2015-2020). The second wheel tax has a sunset date of April 1, 2024.

100% of the county Wheel Tax revenue is deposited into the Debt Service Fund each year to pay county debt. One common misperception is that the wheel tax goes to the school system for operational expenses. This is not the case. Wheel tax pays for schools’ capital expenses, school building debt, and county debt generally.

SOURCES OF DATA

The sources of data for this report are the Summary of Outstanding Debt generated by Cumberland Securities and data taken from the current fiscal year county budget. The debt service fund balance was reported by the Jefferson County Finance Director.

David Seal is a retired Jefferson County educator, recognized artist, local businessman, 917 Society Volunteer, and current Chairman of the Jefferson County Republican Party. He has also served Jefferson County as a County Commissioner and is a citizen lobbyist for the people on issues such as eminent domain, property rights, education, and broadband accessibility on the state level.