Chamber, Mayor, & City Manager React to Misguided VDT "City in Debt" Article

Staff Report From Valdosta CEO

Thursday, April 11th, 2013

As you may know, the Valdosta Daily Times recently published a story ("A city in debt: A look at Valdosta's GEFA loans") which unfortunately was picked up by Georgia Trend Daily and circulated throughout Georgia. The implication of the story is that the City of Valdosta has been negligent in making timely payments on utility infrastructure loans from the Georgia Environmental Facilities Agency, and that $45 million in outstanding GEFA loans is an unusually large amount for a City of our size.

The Chamber has a responsibility to be concerned with our community's reputation and so we asked Mayor John Gayle and City Manager Larry Hanson to meet with us on April 9 to discuss these two implications. According to the facts presented, these implications are inaccurate and have unfairly portrayed our City as being financially unstable.

On April 9, the Mayor and City Manager met with the Chamber Board of Directors, along with the Chamber Community Council and former Chairmen of the Chamber Board, and addressed the following questions:

  • Has the City paid its GEFA loans on time?
  • Is there a "discrepancy" between the City and GEFA as to the accounting for the loans?
  • Is the City's GEFA debt amount reasonable, compared with other communities of our size?
  • How did our current wastewater treatment situation arise, and what is the City's plan for funding needed improvements?

The Chamber Board appreciates the openness of our City leaders, who responded to all questions from the Chamber group present. Following is a summary of the City's responses to the Chamber's questions:

Question #1: Timely payment of GEFA loans - The City assures us that it has never been late on a GEFA loan and is not nor ever has been past due on a GEFA loan payment. They explained that GEFA loans are set up for repayment by bank draft, eliminating any possibility of a late payment. The City shared this statement from GEFA: "...the City of Valdosta doesn't have any loans that are currently past due. In fact, as long as it's been a GEFA customer, the City has made its loan payments on time."

Question #2: "Discrepancies" in GEFA and City records - The City reported that the VDT asked the City for financial information from its most recent audit (CAFR), which was through June 30, 2012. GEFA provided the VDT with financial information through the most recent month, March 31, 2013. The City explained that, taking into account the 9 month differential, and that GEFA did not include capitalized interest (similar to closing costs added to the principal balance of a home loan) in the grant award amount, GEFA's numbers and the City's numbers are identical as to the amount owed by the City to GEFA for active loans. So once the dates are reconciled, and capitalized interest is considered, there is no difference in the amounts reported by GEFA and those reported by the City in the fiscal year 2012 CAFR. Mayor Gayle and other City officials have discussed the VDT story with GEFA, and GEFA and the City are in agreement there is no "discrepancy" between the City's financial numbers and GEFA's. The City's external auditors (Mauldin and Jenkins) also stand by the City's audited financial statements. The City noted that its finance department has won the Certificate for Excellence in Financial Reporting for 26 consecutive years, and stands by the numbers presented as well.

Question #3: Amount of City debt - The City reported that it meets and exceeds all requirements for loan eligibility including measures such as debt-to-income ratio, strength of most recent audit, and other factors financial institutions utilize to determine eligibility. The Chamber compared the City's current $45 million water and sewer debt, as well as the additional debt over the next few years, to other Georgia communities of our size. We concluded that our City's water and sewer debt is about average, neither the highest nor the lowest among our peer cities. It was also noted that the City has no General Obligation bond debt, which is rare.

Question #4: The current situation and future plan for funding water and sewer projects - A March 22, 2013 press release (copied below) from the City that was distributed to all local news media was shared with the group, which provided a detailed explanation of:
The current situation with the Withlacoochee Wastewater Treatment Plant
The $168 million in capital improvements to the City's water and wastewater systems made during the past 20 years
The regional flooding in 2009 that resulted in a redefinition of the floodplain in South Georgia
Lessons learned from the 2009 flood
The safety of water in local rivers
Possible funding sources for future water and sewer improvements
Regarding future funding for water and sewer projects, the City reported that they increased water and sewer rates in 2012 as one of several measures to finance water and sewer projects that have now been completed. However, this rate increase will not produce extra funding that can be used for a new wastewater treatment facility. The City reported that they are planning to use approximately 70 % of SPLOST VII funds to retire GEFA debt and for capital projects to resolve the wastewater issues. Alternative sources of funding could include a water and sewer rate increase, or a property tax increase.

The Chamber Board asks our members to help us disseminate this important information. We also ask you to support all of our local governments in their efforts to fund important community projects through the continuation of our SPLOST, which will come up for a vote in November 2013.