By ERIC MEYER

Staff writer

Which will county voters hate least: a new sales tax or borrowing money set aside for resurfacing paved roads?

Or are they even convinced the county needs what either would pay for: a new waste transfer station, total cost of which could swell to $2.5 million, almost as much as the county paid for its jail?

These are among the questions county commissioners must answer — and soon — as they struggle to come up with a budget for next year and decide whether to put a question about the transfer station on November’s ballot.

The county’s bond lawyer and tax accountant both weighed in on the questions at Monday’s county commission meeting.

Veteran commissioner Randy Dallke already seemed to have made up his mind on which of six options the county could choose when paying to replace the former power plant where trash piles up until it can be trucked to out-of-county landfills.

A new sales tax

Dallke favors issuing sales tax revenue bonds — as was done to pay for the jail.

“I loved that plan,” he said. “It worked great for our county. And it was over with and done before the project’s projected date.”

Voters approved a 0.5% tax on sales in April 2011 to pay for the $3.1 million jail, which opened the next year.

In part because of low interest rates, the tax, though authorized for 20 years, raised more than needed and was eliminated last summer after just seven years.

“I still would vote for a sales tax, but the commissioners would have to bring it to a vote,” Dallke said, noting that any bonds would have to be approved in a referendum.

The two other commissioners, and public sentiment, might not allow that.

“I believe sales taxes is sort of an issue here that probably they don’t want to go (with),” Dallke said. “At least that’s what I’ve heard from the other two commissioners.”

Voter approval required

The county would pay the lowest interest rate with sales tax bonds, David Arteberry of the bond underwriting firm George K. Baum and Co. said. And it wouldn’t have to worry about cutting other parts of the budget.

But the plan would require approval from voters, as would the other least-costly plan: issuing traditional general obligation bonds, paid off by property tax revenue instead of a new sales tax.

More esoteric lease-purchase plans that Arteberry outlined might avoid the need for an election but could end up costing the county hundreds of thousands of dollars because interest rates would likely be higher and legal costs in setting up the schemes could swell.

“Doing a more complicated lease-backed bond issue of that size, the expenses start to pile up on you,” Arteberry said.

Lease-purchase lenders might also be more reluctant to finance a transfer station than they would other projects because of the potential for environmental issues arising, Arteberry said.

Borrowing from roads

One variant, suggested by commissioner Dianne Novak, was for the county to borrow the money from itself — specifically, from an untapped $4.5 million capital improvement fund that previous commissioners began setting up nearly 20 years ago to pay for regular resurfacing of paved roads.

The fund’s current balance is a little more than half what commissioners have been told it would cost to completely rebuild what’s regarded as the county’s worst hard-surfaced road, Nighthawk Rd. between US-50 and US-56.

“I have probably a very stupid question,” Novak asked, “but do we have the option of borrowing from ourselves and then paying ourselves back if we have funds available?”

Arteberry had few concerns with such an approach.

“You just have to make sure that you’re not draining your fund balances down so low that you’re creating problems in your operations, and I think you also want to make sure, going forward — although you can’t bind future commissions to do something — that there was a commitment to make the repayment.”

Tax accountant Scot Loyd of Swindoll, Janzen, Hawk, and Loyd cited precedents from other communities and said that commissioners had been discussing splitting the cost of the transfer station — half coming from borrowing and half from recently increased refuse fees paid by residents and businesses.

“There’s no binding resolution that says that $4 million or so has to be used for roads,” Loyd said, “but that’s what a prior commission had said: we want to set this money up to do road repairs.

“So if they had $4 million there and they wanted to borrow $1 million, they could pay themselves back with interest and all that and not have to pay all the extra costs of going through a borrowing structure outside.

“I think that would work. It’s just that some people would have a concern that, if you’re going to take $1 million and put it on the transfer station, what would happen to the roads. Is that $1 million every going to be paid back or not?”

Guaranteeing payback

Arteberry noted that a future commission might change its mind and decide not to repay the money.

If the county wanted to formalize the promise, as Novak indicated she would prefer, it still would have to submit the issue to voters to approve bonds, even though the county planned to purchase them itself.

Either way, public sentiment is likely to play a key role.

“Using up $1 million to do a transfer station could be kind of stressful to some people,” Loyd said.

County clerk Tina Spencer noted that 90 days’ notice would be required to put an issue on the November ballot, and Arteberry added that it could take several weeks to draft a resolution that would start the process.

“If we want to do that on the November ballot, you all would have to do that fairly quickly,” Spencer told commissioners.

“In the next couple of weeks,” commission chairman Kent Becker added.

Arteberry estimated that a sales tax of 0.2% would pay for transfer station borrowing in 10 years.

Sales vs. property tax

Although sales taxes often are regarded as relatively painless, their impact can be greater than expected, and they tend to impact lower-income taxpayers more heavily than they do wealthy taxpayers.

According to Internal Revenue Service and Census Bureau data, for an average Marion County family with $50,212 in annual income and a residence valued at $81,300, a 0.2% sales tax increase would cost $26.98 a year, the same as a 2.9 mill increase in property tax rates.

Because sales taxes have different impact, the county would get only the equivalent of 1.5 mills from a 0.2% sales tax, Arteberry and Loyd said.

Meanwhile, swelling costs of the yet undefined transfer station project continue to concern commissioners.

Cody Nelson, a general contractor with Nelson-Fowles LLC, which recently set up shop in Marion at the former Straub International location, offered to manage the project and guarantee no cost overruns for a fee of about 5% of its total cost.

In the past, the county has relied on its engineering firms and its own personnel to oversee contractors working on such projects.