Covering Costs

-A A +A

While many residents of the Twin Counties are living paycheck to paycheck, it appears local governments are, as well.

Grayson County was forced to borrow $1.6 million to cover the bills for the month of October, but not because of a budgetary problem.

County officials are adamant that the problem lies in the shortfall in cash flow, something that is common during the months leading up to the tax deadline of Dec. 5.

In fact, it's so common that the Code of Virginia includes the Public Finance Act of 1991, which allows governments to borrow in anticipation of the collection of taxes.

The practice is common for governments. Carroll County has done so numerous times in the past, while others such as Lee County put borrowing the money into their yearly budget.

It's also a frequent tactic used by businesses to make payroll or pay for inventory when cash is short and revenue won't be there in time to cover those costs.

Grayson missed being able to pay the bills this month by three days. The county is required to have roughly $1 million in the bank for direct deposit payroll employees through the school system — if it had until the last day of the month, it wouldn't even need the loan.

We commend the county officials for emphasizing the necessity of paying back the borrowed money as soon as possible.

If the county waits the entire 60 days allowed to pay off the loan, it would result in $9,900 in interest fees — or roughly the equivalent of seven or eight citizens' tax bills.

That, according to Supervisor Larry Bartlett, is not using the tax dollars wisely. We agree.

County officials have noted that they intend to pay the loan back within a 10- to 14-day period — once the tax revenues begin to flow in.

The other option for the county was to pursue a line of credit with a bank — which would have required $10,000 up front.

Had the credit market not stabilized after the banking crisis, a loan would not have been possible and a line of credit may have been the only option.

Depending on how the economy goes in the next year, a line of credit may be a safer and more reliable — but more expensive — option than borrowing.

The county picked the better of the two options this time, using as little of the taxpayers' hard-earned money as possible.