The thought of Porter County lending Lake County $15.5 million to sustain
its 2013 budget may be a head scratcher for some but County Treasurer Mike
Bucko said it is a move he will consider only if Porter stands to benefit
from the deal.
Bucko said that on Tuesday Lake County Commissioner President Gerry Scheub,
D-Crown Point, spoke with him briefly about letting his county borrow $15.5
million from Porter County instead of going to banks. Scheub’s county has
limited options to keep from going into a deficit since no new income tax
has been passed.
Bucko stressed that the talks are “very preliminary” but Porter County may
be able to negotiate a lower interest rate than the banks. Instead of
calling it a loan, Bucko said what he is doing specifically is “purchasing
municipal debt” which is a fairly new approach. State legislators have
allowed county treasurers the option similar to tax-anticipation warrants.
“This is just another tool in the county’s toolbox to collect revenue,” said
In fact, Porter County has made bonds with Lake County entities before and
the effort is paying off.
Up to $35 million of debt has been purchased from the Crown Point, Lake
Central and Hammond School districts which will be paid off this year with
interest rates of about 1.5 percent. Recently, Porter County loaned $12.8
million to the City of Hammond for five years with the average net earnings
being as much as 3.85 percent annually.
Bucko said compared to the interest rates that banks offer on investments,
buying debt can generate more than three times the revenue. The most you can
get at banks is still less than 1 percent, he said. Market rates are
expected to remain where they are for the next two or three years.
Counties can now loan money out for a term of five years instead of the
previous two-year limit thanks to a bill in this year’s Indiana Legislature
authored by State Senator Ed Charbonneau, R-Valparaiso.
The state allows counties to invest up to 25 percent of their public fund
portfolios or $60 million in Porter County’s case.
Since the treasurer is the county’s investment officer and the county
commissioners agreed last year to measures allowing the county to lend to
municipal taxing units, schools and libraries, Bucko said he can loan funds
to those entities without consulting the County Council or the Commissioners
Just like any loan, the borrower must first qualify to financially and
legally be able to seek funds.
Bucko said first of all the borrower has to have the assets to guarantee the
debt is paid and cannot have defaulted on a loan in the last 20 years. Local
governments in Indiana are also required to pay off debt services.
Bucko said that he is not certain what funds the $15.5 million will come
from although he has been looking for ways to build interest from the $163
million sale of the county hospital in 2007. But there are other funds that
may be more propitious, he said, like the $10 million in Major Moves money
that can be used for county road projects.
“If there is a real opportunity for us, we will do it. But if it doesn’t
work, then we won’t. It’s as simple as that,” Bucko said.
“Any opportunity where there is a (chance) to make better [interest] on
investment deserves consideration and attention.”