Impact on loan borrowing uncertain

Last updated: August 19. 2014 11:55PM - 573 Views
By - acloud@civitasmedia.com

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When it comes to reporting items involving pensions for employees, city financial statements will be getting a new look.

The government accounting standard known as GASB (Government Accounting Standard Board) has implemented a new government pension reporting standard that will require local and state government entities that provides their employees with pension plans to begin reporting pension liabilities and expenses.

When asked, many of those involved are unsure of the effect this will have on the borrowing abilities of city government. Governmental Affairs Communication Manager for the Kentucky League of Cities, Tyler Campbell said there is no evidence at this time to say that this will impact the ability for local cities in Kentucky to borrow money.

Though unsure of the impact it will have on the city, Middlesboro Mayor Bill Kelley said he believes it’s OK to have to report their liability.

“By doing so people might understand the real cost of employees to local government,” said Kelley.

As for the helpfulness of knowing specifically the portion amount of the cities unfunded pension liability, Kelley said it is a reality.

“I don’t know that it’s helpful to know our part of the unfunded portion, but it’s reality that it was promised to our pensioners,” said Kelley. “The state should have been more responsible in its investments in the past.”

Regarding county government, Bell will not be affected by the new accounting standards, according to representatives with the State Auditor’s Office. Only five county governments in Kentucky will have to report those liabilities: Jefferson, Campbell, Fayette, Boone and Hardin.

Even at the county level, things are uncertain as to how bond agencies will react to the change.

“We don’t really know, yet, how the bond agencies are going to react to all of this,” said representatives from the auditor’s office. “We think that they’re (bond agencies) really going to look at your ability to pay your bills rather than how much debt you have, but we don’t know that for sure.”

Carolyn Jones, Chief Financial Officer of the Kentucky Association of Counties, said people will have to take into account that this is something that has never been reported before. She also said this is nothing the counties are paying extra.

Jones said those that do bank loans generally, when they look at business financials, know that depreciation is “a paper thing and not necessarily a cash flow thing.”

Jones also said she hasn’t seen any comments on the potential impact the new standard will have on local governments.

Anthony Cloud can be reached at 606-302-9090 or on Twitter @AnthonyCloudMDN.

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