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County navigates uncertain times
Economic difficulties result of 'perfect storm'
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Forsyth County News

About bonds
A bond is essentially a debt certificate issued by a government or corporation guaranteeing payment of the original investment plus interest by a specified date. In other words, it's an I.O.U. with interest and a deadline.

The county's current bond rating with financial research company Moody's Investors Service is classified as Aa1. The bond rating with Standard & Poor's, another financial researcher, is AA+.

According to county officials, both ratings are considered one notch below the best possible rating, AAA, which only three counties in the state have: Cobb, DeKalb and Gwinnett.

Officials have also said a good rating makes the county's bonds more attractive to investors.

As this year's election cycle builds to a climax, one of the simmering campaign issues remains the nation's economy.

From financial volatility to the crippled housing market, voters are worried. Rising jobless rates and unpredictable gas prices have not helped.

And Forsyth County has not been immune to the economic uncertainty.

It began over the summer with a widening budget deficit and diminished sales tax collections. Then the county postponed moving ahead with a voter-approved $100 million bond referendum for parks, recreation and green space.

Officials have attributed the delay to the current bond market, though the county has already begun collecting taxes to pay back bonds it has not issued.

At the same time, foreclosures continue to rise. Property owners are feeling the weight of increased taxes on homes they cannot sell for the value at which they are appraised.

To top it off, the Nov. 4 ballot features separate bond referendums to fund construction of a new jail and sheriff's headquarters.

Bad timing? Bad luck? Try a "perfect storm" of events, says one veteran attorney who has worked with Forsyth County for years.

Roger Murray of Atlanta said the current economic crisis was almost completely caused by the mortgage industry.

"It was a perfect storm and it was a perfect storm in an irrational market," said Murray, who is the county's bond counsel for the green space plan. "People reacted irrationally all across the board and that's why I didn't get too worried.

"I felt it would correct itself in a month or two even if [Congress] didn't do the bailout package because it was an irrational response."

Murray said despite all the financial woes, he thinks Forsyth County is "going to be fine."

Fallout began in the housing sector

When, and how quickly, Forsyth rebounds remains to be seen.

Former Federal Reserve Chairman Alan Greenspan last week called the current global financial crisis a "once in a century credit tsunami."

Still, Georgia's unemployment rate for September is the second highest in the nation, trailing only Michigan. To add insult to injury, people are losing their jobs and their homes.

One hundred and seventy foreclosure listings were published in the Oct. 22 edition of the Forsyth County News. About a year ago, on Oct. 10, 2007, there were 120 listings.

Murray, who has more than 15 years of experience in public finance law, said the current economic crisis essentially began with poor lending practices.

"These guys loaned money to people that really shouldn't borrow and they got 100 percent financing and a lot of times they got money back at closing," he said.

Murray said rating agencies started looking at loan packages, without knowing what percentage of them were subprime, and decided the packages were worthless.

"The rating agencies said ... we're going to assume that whole portfolio of loans is worthless and you're going to have to pay the investors off for the entire amount of the issue," he said. "Which is stupid because they weren't all subprime. Let's say 10 or 20 percent were subprime. They still have value and just because they're subprime doesn't mean 100 percent are going to default."

As a result, Murray said, banks started tightening up on credit.

He said he thinks the increase in oil prices was also absurd.

"There's no reason oil prices should've doubled," he said. "Nothing happened. It's just craziness."

Murray also criticized the "hype and panic" that surrounded the economic downturn.

Jimmy Barnett of RE/MAX Greater Atlanta's Cumming location said the economy is the biggest problem when it comes to selling homes for what they're worth.

"My suggestion is if they can hold on for another year to a year and a half (the value) will come back. It's just going to take a while to make its correction," he said.

"The value will come back. It may not come back to the state that it was in, but there again, Forsyth County is not suffering like some other parts of the country or some other parts of Georgia as far as property values dropping."

Barnett said he expects foreclosure rates to get worse.

"In fact, the inside people that I've talked to, banks and what not, are telling us to gear up," he said. "Even though the government is trying to step in and help, it's still going to be worse or a heavier load than what it has been, which is sad."

Barnett, a Forsyth County native, said local foreclosure rates have risen by 25 percent over the last month.

He said the bright light in the gloomy situation is that "if your credit score is good enough, and you're ready to buy, there are some fantastic buys out there."

County could move on bonds next month
By a nearly 70 percent margin, Forsyth County voters in February approved a $100 million bond referendum to develop and improve parks, recreation and green space.

In so doing, they also approved a property tax increase to pay the money back over 20 years that results in $40 for every $100,000 of a home's appraised value.

The plan covers land acquisition, improvement of existing facilities and the development of new ones.

A bond is essentially a debt certificate issued by a government or corporation guaranteeing payment of the original investment plus interest by a specified date. In other words, it's an I.O.U. with interest and a deadline.

The county has already started collecting the taxes that will go toward paying back the green space bond. Property owners have until Nov. 15 to pay up.

David Hicks, the county's chief deputy tax commissioner, said the county expects to bring in about $11.4 million in bond revenue. Though he was not sure of the exact percentage, Hicks said a portion of the revenues is earmarked for green space, while the rest will go toward retiring other existing county bonds.

Interim County Manager Doug Derrer said the county has put the sale of the bonds on hold, though it plans to move forward in November.

"Given the volatility of the current market, we are evaluating our options on a daily basis to determine the best overall strategy," he said.

Derrer said selling the bonds now, if there were any takers, would likely result in higher interest rates.

"So it makes perfect sense to watch the market on a daily basis, on a weekly basis, and determine when the best time is going to be to sell these bonds," he said. "We don't want the public to incur any more expenses than they need to."

Like Derrer, Murray said he thinks the county should be able to start marketing the bonds in less than a month.

"Everybody kind of went on hold for the last couple of weeks," Murray said. "People are already starting to issue bonds and these will be fine. They'll be able to sell them at good interest rates in the next couple of weeks."

Murray explained that when underwriters are trying to sell bonds to investors, if there are more who want to buy the bonds than there are bonds available, underwriters can use that leverage and lower the interest rates.

However, when there are fewer investors interested in the bonds, the interest rates go up.

"So basically they figure out kind of this perfect, magical interest rate that whereby most if not all the bonds can be sold to the investing public," he said. "Then the bonds are sold to the investing public and they get the bonds and pay for them and give the county the money."

Murray said the county plans to issue fixed-rate bonds.

He also said that as the county's tax digest increases, the taxes to pay back the bonds may not.

"Theoretically, (voters) approved a tax increase," he said. "But if the economy is really good, then there may not be one or it may be smaller than the taxpayers thought."

Voters weighing two bond referendums

On the ballot in this election are two proposals for public safety facilities.

One is a $75 million bond referendum to build a 226,000-square-foot jail with 480 beds. It would be paid back over 30 years.

In addition, voters are being asked to approve a separate $16 million bond referendum, with a 20-year repayment schedule, for a 51,000-square-foot Forsyth County Sheriff's Office headquarters.

Like the green space bond, property taxes would be used to pay the money back.

If the jail referendum is approved, homeowners would be asked to pay an additional $52 a year on homes appraised at $250,000.

For the headquarters, the cost would be an additional $13.50 per year.

The jail and headquarters would be built on a 33-acre site off Veterans Memorial Boulevard, which the county bought for $7.1 million in 2007.

Sheriff Ted Paxton and other advocates of the new facilities cite various reasons for approving the measures. They point to jail crowding and rising construction costs, as well as the threat of federal involvement if a new detention center is not built.

Opponents of the plans question several factors, saying the site and price are wrong for Forsyth County.

Murray said approving the measures could be good for the county.

He said bond rating companies look favorably on counties that invest in infrastructure and facilities.

"The rating agencies, the people that are looking from the outside in at the county - that are saying, 'OK, this county is going to continue to grow and be viable' - are saying you guys have to build more facilities and they've been saying that for a long time," he said.

"You've got to build courthouses and parks and all that kind of stuff. If you don't, then you're not going to be as viable. So it's almost like investing in your future."

Murray said bond rating reports show that "one of the negatives in Forsyth County is voters are not approving the bond issues to build these facilities."

Efforts to fund a new jail have failed at the ballot box three times in the past eight years.

"So it's really good that the [green space] one got approved and hopefully these will get approved too," he said.

County's budget deficit surfaces over summer

Regardless of whether the public safety facilities win approval, the county still is struggling with its budget.

Confusion over what appeared to be a $5 million budget deficit ultimately cost former County Manager Rhonda Poston-O'Connor her job in September and cost the county her $157,000 severance package.

The effort to get a grip on what is actually a $9.57 million deficit has led to financial cuts and a hiring freeze on vacant positions.

The 2008 general fund budget was $103 million. But in an effort to pull the county out of its economic nosedive, the revenue has been adjusted to an estimated $92 million.

Derrer said revenue adjustments have resulted in a 12 percent decrease from a majority of county departments and, based on projections, the county aims to end the year having made its $92 million mark.

Derrer said in- and out-of-state training for county employees has essentially been stopped and will be allowed only if necessary.

Some positions require training in order to keep certifications current. He said, for example, if such training is offered out of state, departments will check to see if it is available in Georgia.

"We want them to maintain the certifications needed to do their jobs," he said. "We don't want them to sacrifice that."

Derrer said department heads also are scoping out daily ways they can save money in their budgets.

"They know their departments and they need to continue to look daily for ways to save money," he said. "Any cost-savings measures they can implement, any initiatives, any new ideas about how we can do more with less, I continue to ask them to look at their budgets and they've continued to do that."

It appears there is some flexibility for new hires. Derrer said department heads will be allowed to plead their cases for new employees before the commission.

Some exceptions have already been made. The sheriff's office, probate court, tax commissioner's office, clerk of court and fire department are exempt from the freeze, though county commissioners have instructed them to make up the savings elsewhere.

Forsyth is not alone in cost-cutting measures. Neighboring Hall County has also taken a financial hit.

In addition to a freeze on overtime pay and new hiring, budget cuts have resulted in no paid holidays for fire and support personnel through April. Senior command staff could also have to respond to fire and medical calls.

The worst-case scenario could mean undermanned or out-of-service ambulances, fire engines, ladder trucks or rescue trucks.

Also, while it takes 100 people to fully staff a shift for Hall's 15 fire stations, most of the shifts have only about 90 employees.

Such measures have not been taken in Forsyth.

Derrer said the 2009 budget, which likely will be presented to the commission near the end of November, is also being scrutinized. He said two public hearings will be held on the budget. Those are tentatively scheduled for December.

He said a finance committee, consisting of himself, staff members and two commissioners, has been meeting and discussing the upcoming year's financial plans.

"We've got to come up - and will come up -- with a balanced budget in the very near future," he said.

Sales tax collections on track, but trail '07

One revenue engine for the county is its 1-cent sales tax, known as a Special Purpose Local Option Sales Tax, or SPLOST.

Collections on the current tax, SPLOST VI, began in July after voters in February overwhelming approved the measure, which will fund road and other infrastructure improvements.

Jodi Gardner, Forsyth County director of communications, said the county has collected two months' worth of revenue totaling about $4.62 million. That amount is about $225,000 more than the $4.4 million the county conservatively projected to bring in.

Gardner said for the same time period last year, the county collected nearly $5.5 million.

A battle between the county and the city of Cumming over the city's portion of the current SPLOST collection landed both sides in court. The fray ended last summer with an agreement that the city will receive 4.29 percent of the collection, a share based on its population.

In addition, by Dec. 31, the county must pay the city $10 million of the parks, recreation and green space bond to be used toward an aquatic center.

The county also has until the end of the year to pay the city an additional $2.5 million, which must go toward any of the city's eight prioritized projects outlined in the agreement.

Litigation does not appear to be a factor

Some observers have questioned whether seemingly endless litigation has contributed to the county's money woes.

It would appear, however, that the county's legal fees have not been much of a factor.

According to County Attorney Ken Jarrard, the county was billed $49,967 in its fight with the city over the current SPLOST collection.

But there are two more major cases looming.

In fall 2007, the owners of the Lanier Golf Course and the developers to whom they want to sell the site, filed a lawsuit against the county to have the course rezoned so that it could be sold for residential development.

The plaintiffs originally threatened to ask for $100 million as well, but that amount was not included in the complaint.

The owners, Jack Manton and George Bagley Jr., intended to sell the course to Wellstone, which had a contract to buy the site once rezoned and planned to build a 772-unit residential development that includes a 300-unit continuing care retirement community.  

And in June, the county filed suit against the U.S. Army Corps of Engineers to stop it from leasing Bethel Park in northeastern Forsyth to the YMCA of Metropolitan Atlanta.

According to the county's complaint, the corps' decision to lease the 62-acre park to the YMCA, instead of to the county, violates federal law, including the National Environmental Policy Act.

Jarrard said the golf course and park cases are still in their preliminary stages.

He said so far, the golf course suit has cost the county $8,500 for outside legal counsel. The park suit has cost $34,629.

Newcomers continue to flock to Forsyth

All the while, Forsyth County remains one of the fastest growing counties in the nation.

According to recent U.S. Census figures, based on July 2007 housing unit estimates, Forsyth is the seventh fastest growing county in the U.S. It was one of three Georgia counties in the top 10 of the census rankings and one of 23 in the top 100.

But the ranking was two spots shy of last year's estimates, which pegged Forsyth fifth, and a reminder that it becomes more difficult to stay on top as the population expands.

The ranking came despite the fact the county spent nearly all of 2007 under a moratorium on new residential rezoning applications.

The county commission approved the ban, which stretched from January to November 2007, to give the planning department time to conduct an infrastructure study to help manage growth.

The ban temporarily stopped the development of new residential properties, though commissioners have dismissed its impact as minimal.

Forsyth has topped many lists over the years, including Forbes Magazine's "top places to get ahead." The county ranked second on that list this year, and 13th on the magazine's list of the nation's wealthiest counties.

"When people look at us versus other counties in the metro Atlanta area, and other counties across the nation, we are still one of the best places in the country that people want to look at," Commission Chairman Charles Laughing-house has said. "It makes me proud to be here."