Harlan County Fiscal Court voted Thursday to be the guarantor on a line of credit for the city of Cumberland for up to $500,000 on an approved $3 million Federal Emergency Management Agency (FEMA) Mitigation Grant.
Concerns were raised over the county’s ability to pay interest payments of approximately $40,000 if the city fails to do so.
“We talked with several banking institutions trying to get a $500,000 line of credit for the city of Cumberland,” said County Treasurer Ryan Creech. “The reason we chose $500,000 is usually we won’t have that big a of a draw, it’s usually between $250,000 to $300,000, give or take a little bit. This way they’ll have a little bit of a cushion. The city of Cumberland was not able to obtain this line of credit on their own.”
“We were asked if the county would co-sign for this line of credit. We asked the bank if it were feasible for us to have it unsecured,” continued Creech. “One institution was willing to do it if the county would put up the cash to match the $500,000 as collateral. That’s where we are right now. It’s up to the fiscal court to vote whether we co-sign for the city of Cumberland or not for this line of credit.”
Magistrate David Kennedy asked what risks were being put on the county if they agreed to sign for this line of credit for Cumberland.
County Engineer Leo Miller said 90 percent of the project is federal funds. He said the state of Kentucky will pay nine percent and the county will be responsible for one percent.
“The money is all there,” said Miller. “The risk is not there. We’ll go through all the checks and balances. We’ll do the engineering, construction and administration. Cumberland Valley Area Development District (CVADD) will do their part of administration working with Ryan. The only thing that makes people nervous is that it’s federal government money. I think there’s enough checks and balances. Harlan County has not had any problems with federal money in the past. We just have to do what’s right — all the paperwork and there’s no risk.”
Creech said the line of credit will be used to pay the vendors. He said the cancelled checks and invoices will all be processed through the CVADD. He said CVADD would in turn request the money from the state to be drawn down into an account from the bank that gives the line of credit.
“Once the money gets there, it will be applied to the principal as soon as it arrives,” said Creech. “The only thing you are going to run into is who is responsible for those principals for the interest payments. The CVADD is working to see if the scope can include interest payments. I don’t know that that has actually been done yet. I did talk to the city of Cumberland to see if they will be able to make the interest payments and they are kind of iffy.”
Creech said over the life of the line of credit, a rough estimate for the interest payment is approximately $40,000 for a period of a year and a half to two years.
Magistrate Bill Moore questioned if Cumberland does not pay the interest payment will the county be responsible for paying it.
“If the county is the guarantor on the line of credit, then it would fall to the county to pay it,” said Creech.
Grieshop said this interest payment amount would be on top of their one percent match funds they will be responsible for paying.
“It’s really a well-leveraged grant,” said Grieshop. “It’s just one more case of the city’s putting in for grants and looking to us to match. They are a separate government entity. They need to bring us in on the front end of these things and let us have input. When you apply for these grants, you need to put yourself in a position to be able to handle the match before you apply. “
Moore said he isn’t against matching grants with cities as long as it is equally distributed throughout the county. He said Evarts had applied for a grant and “if the county can match Cumberland, (we) ought to match Evarts as well.”
“As long as we treat everyone equal,” said Moore.”If Cumberland gets $30,000, then I want $30,000. If Harlan gets $30,000, then I want $30,000. “
“Let’s just sit back and let them lose $3 million,” said Kennedy. “This was due to a flood up there. It was out of Cumberland, Benham and Lynch’s control. God controlled that flood. The Federal government came in there and said this is what we’re going to do. I see what you are saying Bill, if something catastrophic happened in Evarts I would sit right here and vote to apply for that. I agree with the Judge when these cities apply for grants, they need to have the money to back them up.”
Moore responded that he didn’t want to see Cumberland lose this grant.
“My concern is the interest payments,” said Moore. “We’ve been talking about coal severance going down 35 percent this year and 50 percent next year. I’m for $3 million for Harlan County. I’m just fighting for what we need now. If we can help each other then we need to. The city of Cumberland is wanting us to pay $40,000 in addition. I think they need to pay this instead of depending on us to pay it.”
Miller said the project did not start with the city of Cumberland, but was appropriated as a flood mitigation project for the city to be used by the U.S. Army Corps of Engineers to build bridges.
“History as it is, FEMA said we don’t build bridges, so the money was appropriated and couldn’t be taken back,” said Miller. “They didn’t ask for it. It’s just — here is $3 million, use it or lose it.”
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