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Pa. budget impasse forces York County to open $20M line of credit
York County commissioners approved opening a multi-million dollar line of credit to keep operations going through the end of the year as the state budget impasse reached its 113th day on Wednesday.
All three commissioners voted at their weekly meeting to borrow up to $20 million through Fulton Bank at 1 percent fixed interest plus associated fees.
"It's unfortunate that the budget impasse has to get to this point," said Commissioner Chris Reilly. "This is the first line of defense."
The county has been dipping into its cash reserve and general funds to cover costs since early July, just after the impasse started when Democratic Gov. Tom Wolf vetoed the Republican-drafted budget on June 30.
But those funds are running low and the county is expecting to have cash flow issues in the middle of November. The county will dip into the credit line as needed, Mark Derr, county administrator, told commissioners.
"I don't know exactly when we'll need it, but we'll have it place," said Doug Hoke, the vice president commissioner.
Status quo: Opening a credit line averts employee furloughs for now, at least, officials have said. It would also allow the county to continue offering services at the same level it does now.
But county services already affected won't be affected and halted payments to contracted service providers won't be restored, said Carl Lindquist, county spokesman, after the meeting.
The county stopped payments to agencies that provide services to its Human Services Department, and the county Area Agency on Aging stopped accepting new consumers seeking some services — such as personal care and home-support services — and started adding them to a waiting list.
The county relies on about $71 million, or $6 million monthly, in Harrisburg-issued funding for state-mandated services, such as human services.
Impact: Though the county's credit line would be a short-term fix and borrowed money would be repaid retroactive to June 30 by the state once a budget is signed into law, it could have lasting implications.
Taxpayers will bear the cost of interest and fees and opening such a large line of credit could also hurt the county's credit excellent rating.
The county has a stable long-term bond rating of AA, a designation it has held since 2010. The rating is the second-highest in the range within Standard & Poor's scale.
Though the county has secured a low interest rate, exactly what it will pay in interest will depend on how much of the $20 million credit line it dips into, officials said
In addition to the interest, the county expects to be hit with $10,000 in bank and attorney fees, Lindquist said..
The county won't be reimbursed for interest it paid, nor for the fees, Reilly noted.
Requests: The county sought three requests for proposals in its search for a line of credit, Derr said.
The borrowed money, under state law, would have to be paid back by the end of the year.
But if a budget isn't signed into law by then, leaving state money stuck in Harrisburg, York County could have to turn to the courts to refinance the unfunded debt, Jens Damgaard, a municipal finance attorney with Harrisburg-based Rhoads & Sinon, told commissioners.
President Commissioner Steve Chronister said York County is fortunate to be in the position to take out such a large line of credit, but doing so highlights the need for lawmakers and Wolf to reach a budget agreement.
"This has to end. They have to come to the table and knock this out," he said. "They really need to think about who it's (the impasse) affecting."
— Reach Greg Gross at email@example.com.