Analysis: Binkley asks about allocation

Wednesday, November 4, 2009

The man asking town and county officials to crunch numbers, to see if one of the federal stimulus programs will work here, has a question about the American Recovery and Reinvestment Act's application in Tennessee.

If the answer turns out to be what local lawyer Bob Binkley suspects, then there will be more money for rebuilding Marshall County's economy through income tax-free revenue bonds that won't be a risk to local taxpayers.

Here's how it works, according to information obtained during an interview with Binkley.

Congress has decided to accept less revenue from income taxes paid by investors in bonds - securities that are, typically, how banks earn more income by loaning money for government projects.

That federal decision is in the Obama Administration's stimulus package - the American Recovery and Reinvestment Act. It's also in the Internal Revenue Code to expand the use of bonds for retail businesses such as a grocery sought for Cornersville, or a so-called "sit-down restaurant" that's supposedly been the apple of everybody's eye in Lewisburg. Previously, that financing system was limited to manufacturing industries.

When Congress decided to increase the use of income tax-free bonds to stimulate the economy, there was a distribution of authorization across the 50 states and Tennessee divided its authorization among its 95 counties.

Marshall County and its municipalities are permitted to sponsor income tax-free bonds that roughly total $4 million. There are two kinds of bonds. One is for public programs such as utility line extensions and the limit on those bonds is $1.5 million. The other kind is for private enterprise and those bonds may total up to $2.5 million.

The limit on the bonds' issuance is based on various factors such as population, unemployment and how badly the county is suffering from the recession.

Moore County's limit is $136,000-worth of bonds, largely because its population is so small. A big distillery also stabilizes that county's economy.

If local governments don't use their allocation, Binkley says he believes it will be held by the state for reallocation and might well be assigned to one of the three counties where a mega-site for industrial development is planned near Covington in West Tennessee.

Binkley suggests that $136,000-worth of bonds authorized for sale by Metropolitan Lynchburh-Moore County isn't enough to do much of anything, so there's a high likelihood that the stimulus bonds won't be sold. That bond sale is too small.

Since the allocation of authorization for income tax-free bond sales was by geographic location, unemployment, and how much the county is suffering from the recession, Binkley suggests that instead of Moore County's authorization going back to the state - only to be used to boost the mega-site in another grand division of the state - then it ought to be made available to Marshall County.

That would increase the total of a potential bond sale here to $4,136,000, thereby combating the recession where it's caused layoffs - instead of building a big development elsewhere.