NEWPORT-The Cocke County Legislative Body's (CLB) Finance Committee unanimously approved recommending to the full CLB the transfer of one of the county's bonds from Ambac Financial Services to Deutsche Bank Securities (DB) in the mayor's conference room at the Cocke County Courthouse Annex on Monday.

Morgan Keegan & Company First Vice President Scott Gibson explained that Ambac has been recently downgraded 17 times to a financial rating of Caa2/CC and Ambac would like to novate their swap positions at no cost to the county.

Gibson said there are a few benefits in novating from Ambac to DB including a higher rated swap provider in DB that has a rating of Aa1/A+/AA-, the county's swap rate will not increase, and most importantly, it avoids the logistics surrounding potential bankruptcy of Ambac.

"By transferring the county will no longer be in the contract with Ambac and if and when they are ready to transfer, then everything will be in place and the transfer can be made without any delays because the CLB will have already approved the transfer," said Gibson. "Deutsche Bank is one of the most financially sound banks in the world and it is based in Germany and backed by the German government. It has taken no funding to help bail it out as it has stood strong during this financial crisis."

Gibson explained the current mark to market remains at $479,000 with an existing swap rate of 3.825 percent, which will not change with the transfer, and the original notional was $5,025,000 with an original trade date of April 27, 2004.

Finance Director Anne Williams asked what other counties were doing.

Gibson said they are preparing to transfer or have already transferred from Ambac.

"So this is an Ambac issue," said Williams.

"Yes it is," said Gibson. "Ambac is projecting it will be out of cash by 2012 if the market does not improve."

"So the county is moving this to a healthier environment and positioning ourselves to be in a better situation," observed Cocke County Mayor Iliff McMahan, Jr.

Gibson said being ready to transfer is the proactive thing to do and this way the county will be ready to move and will not have to potentially deal with an entity in bankruptcy court.

The finance committee approved the transfer when it becomes available in the market. 

Commissioners present were Finance Committee Chairman Clay Blazer, Phil Killion, Henry "Skip" Gregory, Love Henderson, David Taylor, and Norman Smith, as well as County Attorney Fletcher Ervin, Purchasing Director Debbie Gregg and Cocke County Sheriff Claude Strange.

In other business, McMahan presented a report on the continuing efforts to reopen Interstate 40 at the site of the rockslide on October 25.

McMahan said Cocke County Partnership President Don Hurst, Williams, and McMahan all made a trip to Nashville last week to discuss innovative ways to bring some economic relief to Cocke County because the county is contiguous to Haywood County, North Carolina, which has been declared a disaster area because of the rockslide, while Cocke County has not been because the event did not actually take place in Cocke County.

"Cocke County and Haywood County are cut off from the rest of the world because of the rockslide," said McMahan. "We do not have a bypass for Interstate 40 and the rockslide has crippled our economy."

McMahan said they discussed ways of using funds that are not normally used without a county being declared a disaster area, but since the disaster is affecting Cocke County just like Haywood County, then Cocke County should be able to receive some form of economic relief for its businesses and governments much like Haywood County.

Williams said the full effect of the rockslide will not be known until the January economic numbers come out because they will show what has happened to sales tax revenue and hotel/motel taxes.

"After these numbers come out in January, then we will know where we stand," said Williams. "At this point we are projecting a loss of five to ten percent in sales tax and at least five percent in hotel/motel taxes."

McMahan said we are asking for direct financial assistance from the state for our businesses as well as for the city and county because everyone has been adversely affected by the rockslide and we are all hurting.

"I feel better about the situation after the meetings of last week," said McMahan. "We are trying to be creative and tap funds that are not normally used in this situation, so we can directly help our businesses and our city and county governments who are all in a bad situation because of the rockslide."

McMahan said the cleanup of the rockslide is still projected to take until  the end of March, but the harsh part of winter hasn't arrived yet and that could delay that projection.

"We are still asking for one lane to be reopened to get the flow of traffic started again, but that is doubtful at this point," said McMahan. "We are pursuing every avenue to get traffic flowing through Newport and Cocke County again."

Cocke County Sheriff Claude Strange requested of the committee that he be allowed to replace three deputies that he no longer has working in the sheriff's department.

"Daniel Conard has been deployed to Iraq and Cureton and Morgan have both resigned," said Strange. "I need to be able to replace these deputies and with the hiring freeze, I cannot do that. Can we replace them when the hiring freeze ends on January 1?"

Strange said he would like to hire two full time deputies to replace Cureton and Morgan and hire a temporary replacement for Conard until he returns from Iraq in one year.

"My deputies are working too much and our compensatory time is near its limit," said Strange. "We need to fill these positions because people are getting desperate and crime is increasing. If you make an arrest, then the officer has to appear in court and that takes additional time above the officer's regular hours."

Strange said the county budgeted the funds for these deputies and he does not understand why he cannot replace them as badly as they are needed.

Williams said the hiring freeze was put in place because of the rockslide and its impact on the county's finances.

"We did budget the funds for the deputies, but we don't know at this point if we will have the cash to pay them if we hired them," said Williams. "We only have $28,000 right now in the county budget and if we lose that then we are in the red. If we lose three percent of our projected funding, then the $28,000 will be gone. Right now we are projecting five to ten percent loss in sales tax and a five percent loss in hotel/motel taxes because of the rockslide."

Williams said the real impact of the rockslide on the city and county will not be known until January 10 when November's numbers come out and then the county will know how much revenue it has lost in November, which will be the telling month for us.

"If we hired someone right now, we might have to turn around and lay them off in April or June and I do not think that you want to do that," said McMahan. "We cannot spend what we do not have."

Williams also informed the sheriff that the cost of the mental health evaluations for the sheriff's department will be $6,750, which is not currently budgeted, but must be completed.

McMahan asked the sheriff to return to the committee in January after the numbers have come out and then they could discuss replacing the three deputies that have been lost.

The Finance Committee also unanimously approved appointing the county mayor, the finance director, and Gay Webb to be the three-member team to represent Cocke County on the Environmental Protection Agency's Technical Work Group, which was established to help restore the Pigeon River to a pristine state, as it is above the Canton pulp and paper mill.

Ervin informed the Finance Committee that Allied Emergency Medical Services and the county has been named a co-defendants in a lawsuit brought against Allied.

"I am not worried about the county being liable in the suit, but I am worried because Allied did not have us on its insurance policy as our contract states it should, which places them in breach of contract," said Ervin. "This will cause the county to be responsible for the deductible, which is $10,000, and according to the contract Allied should have listed Cocke County as covered under its insurance policy and they did not."

McMahan said it is Allied's responsibility to have us listed on its insurance policy as the contract states so they are responsible and should have to cover any expense associated with this matter not the county.

The committee discussed several options and unanimously approved having Ervin contact Allied to see where it stands on this issue, so the CLB will be ready to make a decision on what to do at its next meeting concerning Allied not putting the county on the insurance policy.

"We need the services Allied provides, but we need them to honor the contract, so the county is not liable for the deductible," said McMahan.

The committee also discussed compensatory time and Williams suggested forming a personnel committee to begin to deal with the excessive amounts of compensatory time accrued by county employees, but the committee took no action on the discussion at this time saying the situation will be dealt with after the first of the year.

The next regularly scheduled CLB meeting is set for Monday, January, 11, 2010.