Nielsen opposes inter-fund loan repayment

SANDPOINT — Bonner County Commissioner Mike Nielsen is advocating against the repayment of $3.1 million in inter-fund loans because they violate the Idaho Constitution.

County commissioners, acting on the best legal advice they had at the time, borrowed $1.6 million and $1.5 million from the county’s solid waste fund to finance the new juvenile detention facility and the comprehensive overhaul of the Bonner County Courthouse.

The loans are being paid back over a 15-year period with interest rates of 0.20 and 0.30 percent.

Idaho Code allows short-term transfers, although the Idaho Constitution forbids counties from incurring indebtedness beyond a single fiscal year without voter approval.

“Certainly, it was contrary because the voters didn’t approve it,” Nielsen said of the two inter-fund transfers.

Nielsen argues that since the loans were unconstitutional, they are null and void. Moreover, he said repaying them would amount to unfairly “double-dipping” taxpayers.

“Now the same taxpayers are going to have to pay twice. They paid it the first time and now they’re going to pay an additional $210,000 a year,” Nielsen said, referring to the annual loan payment.

Commission Chairman Cary Kelly isn’t convinced yet the board should change its course and renege on its prior promise to repay the loans.

“I don’t see us doing anything but paying the loans back on time as we’re obligated to do unless something intervenes that would change that,” said Kelly.

Assessor Jerry Clemons said it would be disingenuous not to repay the funds.

“If you don’t pay it back, you divert those forever. And if we pay ‘em back, we’ve diverted those funds temporarily,” said Clemons, a former county commissioner.

The legality of the loans remains a matter of dispute.

Clerk Marie Scott contends inter-fund transfers are lawful, a position that’s been backed by the prosecutor’s office, in addition to attorneys from the Idaho Counties Risk Management Program and the Idaho Association of Counties.

Nielsen and the county’s bond counsel assert the loans are illegal. Nielsen is hoping to further bolster that position with an opinion from the Idaho Attorney General’s Office, which has been asked to weigh in on the matter.

A 1st District Court judge was asked to settle the question during judicial confirmation proceedings for the courthouse remodel financing, but the court declined to delve into the question.

Inter-fund transfers are used by counties throughout the state to cope with costly capital improvement projects and other funding struggles.

“All over the state of Idaho there are many counties and cities that are using this as a mechanism to help finance various issues that they have to deal with,” said Treasurer Cheryl Piehl.

Until the uncertainty is resolved, the board does not anticipate making any more inter-fund transfers.

“It’s questionable enough that I certainly wouldn’t want to do it in the future,” said Kelly.

The commission is scheduled to resume its discussion of inter-fund transfers today.