Commissioners balk on improper loan repayments

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SANDPOINT — Bonner County commissioners voted Tuesday not to repay $3.1 million in inter-fund loans because they were likely illegal.

The decision cleared the board on a unanimous vote, although Commission Chairman Cary Kelly and Commissioner Glen Bailey admitted that repaying the loans would be the moral thing to do.

“My basic desire is to back our commitments. I would like to do that,” said Bailey.

However, commissioners found that repaying the loans from the county’s solid waste fund would violate the same laws that appear to have been violated when the long-term loans were made.

“There really is no remedy,” said Kelly.

Two inter-fund loans of $1.6 million and $1.5 million were made in 2011 and 2012 to finance construction of a new juvenile detention center and complete a costly courthouse remodeling project. The loans were to be paid back with interest over a 15-year period.

But a bond attorney hired by the county determined that Idaho Code and the state constitution prohibited such long-term loans. The Idaho Attorney General and Bonner County Prosecuting attorney offices ultimately reached similar conclusions.

Idaho Code and the state constitution bars counties from entering into long-term loans without voter approval. The Idaho Constitution also deems improper loans null and void.

Moreover, there is nothing in state law which guides counties on what to do if an illegal loan has been made.

“There’s no curative provision under Idaho Code and we can’t read into it if it’s not there,” said Marshall, who advised the commission to abandon repayment plans.

Clerk Marie Scott argued the loans should be repaid, while Treasurer Cheryl Piehl urged the county to subject the repayment question to the same rigorous analysis that were applied to the loans. The Idaho Counties Risk Management Program, which insures the county, and the Idaho Association of Counties have also reportedly urged the board to hold off on a decision.

“I am asking for more time before we make another $3.1 million decision,” said Piehl.

But Commissioner Mike Nielsen said there has already been ample delays and holding out further could result in a qualified external audit, which could boost interest rates. Additionally, the count has already made a $108,000 loan payment

“The cure is in the constitution,” Nielsen said, referring to the loan nullification language.

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