Friday, Aug. 08, 2008

AB seeks loan to continue its climb out from depths of debt

$400,000 to consolidate payments due

ATLANTIC BEACH -- Having now paid in full many of its previously overdue bills, the town of Atlantic Beach is seeking a $400,000 loan to finish paying its remaining debts and court judgments.

If successful, the effort could help clean the slate for a town plagued by recent monetary scandals. It also could begin to repair its financial credibility by transforming its debt from a hodgepodge of penalties for mistakes and failures into one debt owed to a bank.

"If we can settle these, we're at the point where we don't owe a bunch of money to anybody anymore," said interim Town Manager Charles Williams. "Literally, the town's out of debt."

With a failsafe mechanism planned to ensure repayment and encouragement from Williams' employer, the Municipal Association of South Carolina, Williams said at least two banks are willing to consider making the loan. More than $200,000 to begin repaying the debt is already built in to the 2008-09 budget that passed Monday night, and by September, Williams said, he hopes to bring a loan proposal to the Town Council for a vote.

Old debts

After March's indictments and suspensions of Mayor Irene Armstrong and Town Manager Marcia Conner, the Municipal Association of South Carolina sent Williams, as temporary town manager, to help the struggling town. He discovered about $620,000 in unpaid bills, old lawyers' fees and outstanding court judgments against the town.

A list of the past-due bills as of March 31 shows nearly 60 individual creditors owed more than $275,000 by the town. During the following four months, Williams paid or otherwise negotiated about $222,000, satisfying debts to dozens of small-business creditors.

Now all that remains of individual unpaid accounts are $23,000 to Santee Cooper and the $30,000 to the S.C. Retirement System, and Williams said he has arranged payment plans with both.

Repaying the debts has a sort of Catch-22 effect, however: The more the town repays, the more new creditors come forward, Williams said.

The town also has more than $40,000 in legal bills from four law firms for a variety of cases, and judgments in another three cases: $7,500 to former police Chief Benny Webb, $50,000 to D.H. Griffin Wrecking Co. and $58,710 to the law firm of Duff White and Turner.

The largest looming debt is $175,000 loaned by former Town Manager Carolyn Montgomery.

She has since sued the town to be repaid, also demanding $111,000 in interest and another $150,000 for breach of contract.

Although the total $436,000 seems staggering, Williams said cash in hand to repay Montgomery's $175,000 loan could help in negotiating down her claims for the remaining interest and damages.

New loan

Under state law, a town can take out a loan for less than 8 percent of its assessed value without having to put the matter on the ballot for voters. County officials are working to determine exactly how much that would be, but Williams estimates the maximum loan he may be able to ask for would be about $400,000, to be paid over the next five years.

Because the amount the town can borrow is unknown, so is the yearly payment. Williams built $218,000 into the coming year's budget for debt repayment, but he anticipates that the annual bill on a five-year, $400,000 loan would actually be lower.

The leftover money, Williams said, will provide enough money for the town to go back and conduct the audits of town finances that were never done for the past three years.

"It would give stability back to the town," said Atlantic Beach Councilwoman Charlene Taylor. "It would show we're about business, and not about throwing money away."

Last year, Atlantic Beach violated a court order to raise property taxes to pay off two of the lawsuits by missing the state's tax-increase deadline. By repaying those debts in particular, Williams said the loan will help the town avoid raising taxes this year.

"The big thing is to avoid a property-tax increase," Williams said. "They've already got the highest taxes on the Grand Strand."

Although local governments routinely borrow money for projects based solely on the good credit associated with their steady flow of tax money, Atlantic Beach has a checkered history when it comes to repaying debts. Because of that, Williams said, the arrangement with the bank may include a provision that each year's debt payment comes directly from the county treasurer, rather than from the town.

"The word of the town ought to be enough," Williams said. "But given Atlantic Beach's reputation in terms of paying bills, we may have to arrange it so the treasurer cuts the check directly to the lender."

Such an arrangement makes the Municipal Association uncomfortable, as advocates for cities' rights, Williams noted, but speaks to the seriousness of the town's financial condition.