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Commission authorizes up to $125M in tax anticipation notes after lengthy finance briefing
Summary
The board approved a resolution authorizing tax anticipation notes (series 2026A/B) to provide interim funding; commissioners pressed administration and advisers on interest-rate mechanics, permitted uses, default triggers, and longer-term fund-balance restoration.
The commission debated Item 29, a resolution authorizing issuance of tax anticipation notes (TANs) with an aggregate principal amount not to exceed $125,000,000 (split between series A/B) to provide interim cash for FY26 appropriations and to cover near-term cash-flow needs.
Deputy Director Danielle Schonbaum and financial advisers explained that series B would be repriced monthly at 75% of SOFR plus a 42-basis-point spread and that estimated market rates at the hearing translated to a preliminary loan rate in the mid-3% range. Albert Brown of PFM Financial Advisors confirmed the rate resets monthly. "The rate is reset monthly," he said (SEG 3259'3260). Commissioners asked whether proceeds could be used for capital projects and bond counsel explained that using TAN proceeds for capital costs would constitute an event of default under the loan agreement; lenders had requested CIP information as part of conditions precedent but proceeds must be used for operational cash flow per the note structure (SEG 3320'3330; SEG 3344'3350).
Deputy Director Schonbaum said the county expected to begin external loan repayment in December and to complete payment by March depending on property-tax receipt timing. Commissioners pressed why the county needed to borrow and discussed fund-balance restoration plans: Schonbaum noted the FY27 adopted budget included a two-cent allocation to the fund balance, estimated cash at fiscal-year-end was projected to be $50M'$60M, and the county would continue efforts to rebuild reserves (SEG 3416'3424).
Why it matters: The TAN resolution lets Shelby County bridge cash-flow gaps but increases short-term interest and fees. Commissioners asked detailed questions about default triggers, permitted uses, fees and total interest costs, and whether the state comptroller would accept the financing plan.
What comes next: The resolution passed 9'3; administration will work with bond counsel and the selected lender to finalize documents and seek comptroller approval as required by state law.
