‘It’s Paid For.’ ‘You Can’t Add Up Each Re-Finance.’

Bowie County TexasThere are a couple of misunderstandings that have become misdirections.

The first one: “The building [601 Main Street] was paid for.” or “The building was only purchased once.” Well, yeah. SWEPCO received a bank draft or cashier’s check at the same time the county received the title to the property. That’s never been an issue, but it certainly gets used a lot as misdirection.

The second one: “You can’t add up all the amounts refinanced! If you buy a house and refinance, you’re not paying for the house twice!” Let’s look at a chart:

Date Bank Amount Borrowed Interest Rate
03/19/1998 Hibernia National Bank $375,000 4.636%
03/26/1999 Hibernia National Bank $350,000 4.800%
03/28/2000 State Bank of DeKalb $317,000 5.130%
01/11/2001 State Bank of DeKalb $283,832 3.590%
08/28/2002 State Bank of DeKalb $260,000 2.590%
01/04/2003 State Bank of DeKalb $260,000 1.980%
01/02/2004 State Bank of DeKalb $245,000 1.940%
09/01/2005 Regions Bank $245,000 3.280%
08/30/2006 State Bank of DeKalb $220,000 4.190%
09/29/2007 State Bank of DeKalb $190,000 4.090%
10/20/2008 Capital One $150,000 2.790%
11/24/2009 Guaranty Bond Bank $140,000 1.750%

The first loan, in March of 1998, was for the full purchase price of $375,000, plus interest, of course. The amount (re)financed stayed the same, or went down, each time. It looks like a standard refinance plan, right?

Here’s the problem. If things are done correctly, the county tells the appraisal district how much debt they have, and the appraisal district levies a tax sufficient to pay off the debt. (That’s in addition to any tax necessary to fund maintenance and operations.) Then the county takes that money and pays off the debt. State law is pretty clear on that. If the county had used the money they took from the property owners to to pay the debt, there would have been no need to refinance anything.

However, it would seem the county used the money taxed to pay off the debt for some other purpose, leaving unpaid debt. So, the next year, the process was repeated.

Sufficient money was taken from the taxpayers to completely pay off the debt, but the county spent most or all of it on something else. This happened over and over.

State law is very plain – counties must use money collected to pay debt for that purpose only. As attorney Jim Allison stated:

It appears that taxes levied for debt service… or funds received from debt financing have been transferred into the general fund and utilized for maintenance and operating expenses.

In either case, this was a serious accounting error and violated the requirements and restrictions on county taxation, budget, and financial transactions.

Is that clear? The citizens “gave” the county enough money to pay off the loan – over and over. So, yes – you add up the amounts financed to find out how much the citizens “paid” for the property.

It’s easy to misunderstand, if you don’t look at the implications of being taxed to pay for debt. And that little bit of complexity makes the subject a gold mine for those that want to mislead you or misdirect you from the truth:
This was neither good management of county resources, nor legal.

By the way… Did you notice the interest rates on each new loan? The Texarkana Gazette quotes Mr. Carlow on February 7: “Each year, we bid it out again to get the lowest interest rate. That’s why you see different banks.” Apparently, interest rates weren’t always the primary consideration.

0 thoughts on “‘It’s Paid For.’ ‘You Can’t Add Up Each Re-Finance.’

  1. The hat trick here is the same thing that Wall Street has been inflecting upon the American people. ACCOUNTING FRAUD!

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