Part of the proceeds from the sale of Murfreesboro Electric Department could fund a new foundation to serve community needs, in addition to providing for capital projects, according to recent City Council discussions.
The council met last Wednesday and discussed options for using the proceeds from its sale of MED. According to council documents, Middle Tennessee Electric Membership Corp. (MTE) made a down payment of about $40 million and will make annual payments for 15 years in the amount of about $17.3 million.
During the discussions, council member Rick LaLance suggested splitting the proceeds into three parts: capital projects, a community foundation outside of the council’s control and a trust fund that the council could spend only if allowed by referendum.
City Manager Craig Tindall suggested it may be easier to create a special city fund with restrictions rather than a trust fund.
Tindall provided council members with a draft financial model laying out scenarios for using the funds for capital improvement projects and debt service.
After the meeting, LaLance told the Murfreesboro Post that before MED was sold, the city received about $3 million a year in payments from the utility as payments in lieu of taxes. Because of the structure of the MED sale and MTE’s payments, that asset will turn into annual income of between $10 million to $12 million to the city. He said that could help offset the need for a future tax increase.
The council directed Tindall and city staff to study the proposals. Tindall said it would take a number of months due to the complexity. Council member Ronnie Martin said he did not want staff to feel rushed because of the complex nature of the proposals. Also, the Tennessee comptroller of the treasury will have to be involved, Tindall said.
Martin told the Post that the proceeds work out to roughly $40 million in cash and a $202 million promissory note which with interest would be about $242 million to $245 million. MED’s cash on hand was a little lower than expected.
Martin said during the meeting and later mentioned to the Post that he opposed the sale of MED and that he never envisioned using the funds for capital projects. He said he wants the money to be protected for the long term.
With the city having a long wish list for capital projects, one must ask whether the city has unrealistic wants or whether it should have raised property taxes years ago and missed that opportunity to fund such projects. He said a foundation outside the council’s control may be better than a restricted city account.
“I’m uncomfortable solving problems with money we will never have again,” Martin said.
In other news, Mayor Shane McFarland on Wednesday said that a city-county emergency services meeting was postponed because some firefighters tested positive for COVID-19. The meeting was to have been on Sept. 17, but may happen Thursday, Sept. 24 at 9 a.m. at the Murfreesboro Police Department.
Editor’s Note: Draft documents that council members studied in planning how to spend MED proceeds are posted with the online version of this story at murfreesboropost.com.