Blog: Carroll County's New Shakey Loan Program

The Commissioners just took a roll of the dice with my taxes. I could get better odds of a return on my investment in Las Vegas.

Many of us are patching together the money to pay our County property tax bills before the end of July to avoid paying any interest over the following months; many more are paying their taxes through their monthly mortgage payments. It’s a lot of money for all of us to shell out and these taxes are vital for the County to provide its functions throughout the year. Regardless of how much your tax bill is, don’t expect a discount if you pay with cash.

I do believe that all of us expect that the County will use the taxes for operating schools, roads repair, libraries, senior centers, parks maintenance, landfill and water / wastewater treatment plant operations, snow removal, and many other services provided by a good staff to make it all run well. I have never expected that my taxes would be used for highly speculative, risky loans to anyone who wanted to start a new business but didn’t have the dough themselves to do it with. For loans like that there are banks, the likes of Household Finance, private investors, venture capitalists and the world famous Local Investment Consortium of Mom & Dad and Aunt & Uncle.

I fully expect the county to invest the millions of dollars in its fund balance in investments that at best will earn a little interest and at worst will not lose any of the principal.

The Commissioners voted on Thursday to lend our property taxes out to people with ideas but who can’t get the money anywhere else – they will actually have to provide a letter from a bank as proof that their loan was declined to qualify as a borrower from the new County Shaky Loan Program for big ideas with no dough.  The basic idea behind this new program is not without merit – the County wants to create new small businesses here; however, they put this scheme on a fast track; didn’teven look closely at what other Counties are doing with similar loan programs; didn’t require collateralization and in so doing put the taxes we are struggling to keep up with at high risk. Why should they, their attitude is that it’s not their money.

I’d like my money back. If I wanted the Commissioners to invest my taxes in the equivalent of a roll of the dice at a casino or a wager on Wherewithall to win at a race track, I’d sooner do it myself and have the enjoyment of letting it all roll at huge odds. This is one more instance of the Commissioners getting the public’s money confused with being their own money. If the Commissioners felt that the risk involved in making unsecured loans without the benefit of so much as a credit report on the applicant then they should put their own money where their good intentions are and offer to make the loans themselves. The Commissioners could be financial “Angels” if their passion is so intense and their generosity so large.

This loan program did not have to speed into the disaster it certain to become if they would have just taken the time to do their homework and not let their staff rush them into a judgment. They had the opportunity and they blew it, quite intentionally. They took the glossy words of one staff member that “all the other counties have loan programs like this; Carroll is the last to do it”. That is a shady lie made by someone with a reputation for stretching the truth beyond the breaking point. The seed money for this program comes from the Maryland Department of Economic Development (DBED). The DBED revolving loan program has been available to Counties for at least a dozen years – it just took until now for the County’s pathetic economic development office to catch on to it and now it has put falsified spin out to portend there was a big rush necessary to get the $500,000 from the State which the County has now matched with tax dollars.

If there was a need for a rush, it was to get this Shaky Loan Program approved before the public had a chance to cast a discerning eye on it. The hurry-up was manufactured to slip it over on the taxpayers before they realized what was up. Critical thinking is disallowed in County Government these days and the public is discouraged from using it for fear they’ll catch on to the folks they elected last time. Under this County administration masses of political hot air passes for considerate deliberation.

I did a little exploration on the loan programs that other counties have engaged for similar good intentions. There are two very big differences between what the Commissioners just rushed to approve here and what “all the other counties” are doing. It’s called securing the loans and having a written management plan before the loans are made. The “Other Counties” are requiring that the loans be fully collateralized and they have detailed administrative guidelines in place to assure the money will be lent responsibly by loan committees that include the County Finance Director or Comptroller. Here’s what else the Commissioners intentionally missed in their vote for the loanprogram:

  • Requiring a set number on a FICO score. Everyone knows that there are good credit scores and bad credit scores. All the County Shaky Loan Program is going to require is that you have a credit score; which is the equivalent of asking for proof that the applicant has a heartbeat. That may be because the County Comptroller has admitted that the County doesn’t get credit scores to begin with and has no way of evaluating what a good or bad score is.
  • There is now  $1 Million in the new Shaky Loan Fund (SLF). One half came from the State, one half from us, the taxpayers. The State requires that any of its funds be secured with collateral. The Commissioners specified that the Carroll taxpayers money not be collateralized (what the heck, it’s not THEIR money they are playing with). There is no provision to account for co-mingling of the State and County money. State auditors may have some difficulty with that in the future. The County does not provide an internal audit anymore.
  • The terms of the loans will be 2 ½ percent over prime with a three year term and a 15 year amortization. If you did a double take on that, welcome to the club. From this I suppose that the money will be paid back somewhere between 3 and 15 years, I guess. Maybe. That will give the
    Commissioners plenty of time to clear out of office before the stuff hits the
    fan on these loan terms … and any defaults.
  • The Shaky Loan Program is a far better deal than you get at the local pawn shop. No real estate to put a lien on, no gold watches or musical instruments, no rings and no redeemable investments. No collateral allowed! A lender MAY have to put up as much as 10 % of the money they want to borrow in cash but that goes toward the use of the loan, the County won’t be holding any of that cash. There is a $150 application fee but that seems high to me given that the County won’t even be buying a credit report on the applicants and that it’s county staff doing all the work on the loans. The likes of Joey Bananas may not require collateral on any money he lends you but then he’s going to charge 50% interest and you KNOW he’ll be around to collect it if you are late with the payments. Mr. Bananas isn’t about to make a speculative loan with his  money without being rewarded for his risk and he sure isn’t going to give his dough away because you have a nice idea and he’s a swell guy, after all his name isn't Joey Santa Claus. The County Comptroller has publicly explained that he is prepared to collect taxes, not loans. He views these loans as grants because there will be no pursuit of delinquent loans. That’s because the County is not in the loan business, or at least it hasn’t been up to now, and it does not “service loans”, which is to say, get credit reports, evaluate them, follow up that the money is used for what it is intended for and then do whatever is necessary if the borrower falls behind in payments or stops altogether.

I certainly did not expect a conservative Republican Board of Commissioners such as this one to jump into such a risky game with our taxes. I really would like my money back because I hear there is a “mortal lock” to win named Runawaywithitall in the 7th race at Pimlico next Wednesday. He should go off at no less than 12:1 odds and those are a lot less than what the default rate is on the loans that will come out of the Shaky Loan Fund. If I’m going to take that risk, I’d like it to be me who decides to do it with my money, not a Board of Commissioners that don’t know the depth of the waters they taking taxpayers into and continually confuse their own pocketbooks with the publics.  


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Judith M. Smith July 15, 2012 at 08:13 PM
This is really astonishing....supposedly fiscally conservatives...our money, very little public attention before a decision to do this outrageous thing...just nuts...
SOUTHWESTMINSTER July 16, 2012 at 05:50 PM
Comment by Mr.Ridgely : This is a positive step for the Commissioners and county government. While I do not want to see laws repealed and review processes that protect the public from abuses eliminated, I do think this is a good way to paint a positive business atmosphere for the County. Just today I read about a successful strategy some local governments are taking to move from approaching economic development by trying to lure one company that may employ 50 people to one of nurturing existing local businesses so that 50 of them might be able to add just one employee each - a much less costly approach and one more likely to succeed. In so many words, this approach is to fertilize the garden we already have rather than try to grow produce that just isn't likely to grow here. hmmmmmmm...............
Judith M. Smith July 16, 2012 at 08:58 PM
In this case it is pure manure that is being used to fertilize the garden...an unsecured loan, amortized over 15 years...and one of the votes was cast by a person representing small businesses...tax breaks or something like that may be more appropriate...


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