Shelby County leaders approve plan to seek up to $125 million in short-term borrowing to cover early-year cash needs

Shelby County finance staff on Thursday moved the commission toward a plan to borrow short-term to cover early‑fiscal-year cash shortfalls, proposing a two-part tax‑anticipation note (TAN) package that would provide up to $125 million in interim funding.

Deputy Director Daniel Schonbaum told the Budget & Finance committee that the plan would use a $25 million internal interfund TAN from the county’s debt service fund (Series A) and negotiate an external credit line of up to $100 million (Series B) with a commercial bank. “We tried to be conservative in those estimates to ensure that we had ample capacity in this borrowing,” Schonbaum said. The county’s advisers said the external portion would be a variable‑rate loan indexed to SOFR; the adviser gave a market example of about 3.32% at the time of the presentation.

Financial adviser Albert Brown (PFM) and bond counsel described fee elements that apply beyond the headline interest rate — an origination fee and an unutilized-commitment fee — and said those costs are paid as the loan is drawn. Brown said Regions Bank was chosen as the lowest‑cost provider among respondents for the expected structure.

Commissioners repeatedly asked how long the notes would be outstanding and how the county would repay them. Schonbaum said the expectation is to begin repayment as property‑tax collections arrive late in the calendar year and to complete payoff “as early as December and no later than March,” with the legal requirement that the TANs be paid before the fiscal year end. “We would anticipate having it fully paid off by March,” he said.

Several commissioners pushed for more detail on total carrying costs and scenario modeling if collections are delayed. “Fees on a large loan like this can add up,” one commissioner said, asking staff to model higher rates and longer draw periods. Bond counsel and PFM said the state’s usury limits cap extreme rate exposure and that they had modeled typical market swings; they also said the county had priced banks’ origination and utilization fees into the comparative exercise.

Members also asked how a visible borrowing program could affect the county’s credit profile. Bond counsel said the county will make the required public disclosures and notify rating agencies, which “could change an outlook to negative, or in some circumstances trigger a rating action,” depending on the agencies’ independent surveillance. Schonbaum said the county already saw a negative outlook from one rating agency after earlier fiscal pressures and that staff would continue close work with rating firms and bond counsel.

The committee approved the draft resolution to send to the full commission for further review. Commissioners requested additional sensitivity analyses, a clearer fee schedule, and a report of scenarios under which the county would draw each tranche. The full proposal and a substitute final form will return to the commission for action.