VALPARAISO | Porter County Treasurer Mike Bucko said Thursday the proposed loan of up to $15.5 million to neighboring Lake County is just the latest in what is shaping up to be a profitable investment move.
Bucko, who prefers to refer to the loans as "buying municipal debt," said he already has loaned a combined $35 million to the Crown Point, Lake Central and Hammond school districts.
He said he also just wrapped up work on a five-year, $12.8 million loan to the city of Hammond, which will generate average net earnings of 3.85 percent per year.
"Better than three times the earnings can be made by buying municipal debt," Bucko said.
The typical investment options available to him as treasurer are providing returns of less than 1 percent, with most well under that level, he said.
The school loans are generating 1.5 percent net interest, he said. Crown Point Community School Corp. already has paid back its six-month loan, and the balance from the one-year loans to the other districts is due by the year's end.
While Porter County benefits by earning more interest on its money, the government recipients of the loans pay a lower rate than they could find elsewhere.
Bucko is in a unique position to explore investment options because the county is sitting on $173 million in principal and interest from the 2007 sale of the former county hospital and $10 million from its share of the privatization of the Indiana Toll Road by the state. The county can loan out no more than 25 percent of its overall portfolio, which amounts to a little more than $60 million, he said.
The Porter County commissioners agreed in April 2011 to clear the way for the county to be able to loan money to school districts, libraries and other taxing units.
Bucko said the loans must comply with strict regulations set by the state that guarantee the recipient has the resources to pay back the money. These regulations require that the applicant has not defaulted on a loan for the 20 years prior and works with a financial specialist, he said. The borrowing period is capped at five years.
Bucko said strict guidelines on tapping into the hospital proceeds don't apply to the loan program because it is an investment move and not an expenditure.
Those requirements demand unanimous support of the three-member Board of Commissioners and seven members of the County Council in order to spend any of the hospital principal. Majority support alone is needed to spend interest money.