Temple officials will avert a financial crisis today, when city officials, and not the mayor, authorize payment for the city’s bond debt — a move they must make because Mayor Lester Harmon on Thursday refused to do it.

Harmon issued a memo in which he declined to authorize the transfer of $622,935 in city funds to make the year-end payment on the city’s wastewater revenue bond. The payment is due on the last business day of the year — today — and failure to make the payment would place the city in default on its loan.

But Ward 5 Councilman Richard Bracknell, who serves as mayor pro tem, and City Administrator William Osborne are authorized to sign checks on behalf of the city, and Osborne said Thursday they would both do so this morning.

Harmon’s reason for refusing to authorize the payment was laid out in a three-page memo he gave to city officials at mid-afternoon on Thursday. Essentially, it is the same reason he gave for vetoing the city’s entire budget earlier this month: that the city cannot use SPLOST revenues to pay debt on a revenue bond.

Although using the special purpose local option tax revenues for that purpose was part of the 2018 budget, and received the endorsement of the city’s legal counsel, Harmon has maintained that use of those tax dollars in such a way is contrary to state law.

It was for that reason that Harmon earlier this month issued a veto against the budget, setting the stage for a potential override of the veto when a new City Council takes office in January. Harmon is leaving the office, having chosen not to run for re-election last November, and will be succeeded by Mayor-elect Michael Johnson.

Overriding a mayoral veto will require a “super majority” of at least four of the five votes on council, which next year will also include a new council member for Ward 1, Terron Bivins, who is succeeding Penny Ransom.

In his memo, which Harmon addressed “To Whom it May Concern,” the mayor listed his concerns over transferring funds from the city’s debt service account to make the bond payment.

Harmon pointed out that in 2016, he had authorized a payment from the 2015 SPLOST account, as well as a separate check from the general fund, into the city’s Water and Sewer fund for what he had been told was “a one-time deal” to make the bond payment in that budget cycle.

However, due to a clerical error, those checks were not deposited into the correct account, and Harmon maintains the SPLOST dollars were co-mingled with the rest of the general fund for at least six months in 2017 before the error was corrected.

“The funds have co-mingled throughout most of the year in 2017, “ Harmon wrote. “SPLOST funds that the City Council voted to use to make a debt service payment remained in the general fund for six months and were used to offset operating expense debt, while monthly payments from the water and sewer fund were being moved into the debt service fund for the debt service payment.

“The money was not moved from SPLOST to the debt service account, but instead floated between the general fund and the water and sewer operating fund for most of the year.”

The issue of the clerical error involving SPLOST revenue was addressed several times during the council’s meetings this year, but the city’s legal counsel has taken the position that the error was corrected with no significant consequence to the city.

But Harmon said the method by which the error was made contributed to his other concerns, which include the legality of using SPLOST revenue for debt service.

“I can’t find where it’s legal for SPLOST money to be deposited into an enterprise fund where it co-mingles with all operating revenue and liabilities,” Harmon wrote.

“Due to these questions, I have no way of knowing what funds are being transferred to make the bond payment, or the legality of using the funds that have floated between the general fund, the water and sewer fund and the 2015 SPLOST fund to make the payment,” he concluded.

The bond, which was negotiated in 2010 by a previous city council, has been the source of conflict among council members for the past two years. Water and sewer fees are supposed to make the city’s water sewer fund self sustaining, but not only do current fees fail to pay for the system, the revenues fall short of meeting the bond payment requirements.

The situation will reach a crisis in January 2021, when the city must make a $4.6 million balloon payment on the debt. The council’s rationale for using 2015 SPLOST revenue for debt service was to improve the financial position of the water-sewer fund, so as to be more in line with the expectations of the bondholder.

 

 

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