A bill coming before the Frederick County Council next week will seek approval for access to up to a $100 million line of credit for a “worst case scenario” for fiscal year 2021.
Finance Director Lori Depies said this week she hopes the county never has to access that line, but added it would give her and others access to cash, in case state income tax and property tax payments are delayed. The county was also able to lock in to a good interest rate, Depies said.
The county worked with J.P. Morgan to establish a year-long agreement — pending the County Council’s approval — for access to up to the $100 million line of credit, Depies said. The county initially asked for up to $75 million, but J.P. Morgan was willing to offer an extra $25 million if needed.
“My biggest concern ... was that the credit facilities are drying up,” Depies said. “Banks do not have the capital to lend. They’re lending it out to private businesses. Our financial adviser has let us know that we’re one of the only counties in Maryland that have sought out a line of credit, and it’s probably great that we’ve done that. Because when you need cash, sometimes, you can’t go out and get it.”
The agreement with J.P. Morgan can be renewed and renegotiated for future years, if needed, Depies said.
Chief Administrative Officer Rick Harcum said the proposal will be introduced to members of the County Council on Tuesday, who will then have a policy discussion on it. A final vote is scheduled for the following week.
Vivian Laxton, a spokeswoman for County Executive Jan Gardner, said the public will be able to comment on it via email or by calling in live on-air during normal commenting periods, starting Tuesday.
Depies said she needs the legislation to be expedited versus the normal process for County Council bills — introducing, holding a public hearing and voting over a span of several weeks — in order to lock in the agreement with J.P. Morgan and allow the county to access cash fast, in case it’s needed.
The legislation can be expedited because of Gov. Larry Hogan’s executive orders and declaration of a state emergency, The Frederick News-Post previously reported. That ability ends when the state of emergency is lifted.
The request is different because other borrowing proposals the county has used in the past have been for capital projects, Depies said. The $100 million would be for working capital: payroll, accountable payable, debt service and any other operating expenses not related to capital projects.
“We might not need this, I hope we never do,” Depies said. “But it’s a dire circumstance and I want to have it to meet payroll.”
Harcum said it’s also important to have the credit line available because many Marylanders may be wanting to file their income taxes, because of the federal extension from April 15 to July 15.
It also was important to separate the line of credit discussion from the county’s overall budget process, Harcum said.
“The budget is different: the budget is assuming that income tax revenue will come in at the rate we’ve projected. This is if there is a lag, or there is a delay in the actual cash showing up,” he said.
Council Vice President Michael Blue said he was waiting to hear more from Harcum, Depies and other council members Tuesday about the proposal.
But he did say Depies’ concerns about access to credit, and the availability of credit during the pandemic was valid.
“Those are all valid concerns, I think shared by everybody,” Blue said. “And I think if we can get in line ahead of other municipalities, that’s a good thing.”
Council President M.C. Keegan-Ayer also wanted to hear more from county officials, but understood the argument to access a line of credit.
“I do read the [newspaper] business page so I do know a lot of businesses and organizations are trying to do what this is proposing to do,” Keegan-Ayer said. “From a business perspective, this makes sense, but exactly what they plan to do with it, and where they plan to use it, is what I’m interested in.”