Hidden fees cost Tennessee cities $400K The Tennessean (Nashville, Tennessee) May 14, 2009 Thursday
Copyright 2009 The Tennessean
All Rights Reserved
The Tennessean (Nashville, Tennessee)
May 14, 2009 Thursday
SECTION: NEWS
LENGTH: 530 words
HEADLINE: Hidden fees cost Tennessee cities $400K
BYLINE: NEWS02
BODY:
THE TENNESSEAN
Some 150 local governments across Tennessee were charged approximately $400,000 in hidden fees this year by the Tennessee Municipal Bond Fund.
The fund disclosed the figures on Wednesday just days after an investigation by The Tennessean revealed $45,000 in hidden fee overcharges to Nashville, Murfreesboro and Morristown this year. The fund has a culture of secrecy and weak disclosure policies uncovered during the investigation.
Unlike those overcharges, the $400,000 charged to 150 local governments was within the fund's right to assess, according to Mark McNeely, with McNeely, Pigott & Fox public relations firm, which was recently hired by the fund.
The fees, however, were hidden within reported interest rates.
"The few times they've done this in the past, that's the way they've done it," McNeely said. "There's never been any questions or complaints."
McNeely said he did not have which cities and counties or other local government entities were charged the fees.
The fund's president and chief executive, Charles G. "Bones" Seivers, did not return a phone message left for him on deadline Wednesday night. The bond fund has issued $3 billion in loans to some 225 local governments across Tennessee during its 24-year history.
The fees were for an arbitrage rebate fund used to pay taxes on income earned while money from the tax-exempt bond sales sits waiting to be used for public projects. The federal government requires entities to pay a rebate, or a tax, on income above a certain level derived from tax-exempt bonds.
The fees started being added in January to build up the arbitrage rebate fund, which from time to time gets low so the fund has enough money when the taxes are due to the IRS. McNeely said the loan agreements with local governments say the bond fund has the right to charge the arbitrage rebate fee.
Some fees refunded
The fees charged to Nashville, Murfreesboro and Morristown are being refunded because they were not subject to the arbitrage fees. McNeely said there's no plan to refund the $400,000 in fees to the other cities, however, because they were subject to the fees.
In an interview last week, Seivers said the bond fund in the future would begin itemizing the fees after questions raised by The Tennessean about the lack of disclosure. Nashville was overcharged $17,253, Murfreesboro $20,516 and Morristown $7,337. The newspaper discovered the hidden fees by examining daily interest rates being reported to the market on the federal Municipal Securities Rulemaking Board Web site and matching them up to the rates the bond fund was reporting to Nashville and Murfreesboro.
There was a 10 basis points discrepancy for the days examined, and that difference held as the daily rate changed. When Seivers was first presented with the discrepancies, he said they were within the fund's right to charge. Days later he sent letters to the three cities saying they were owed a refund.
He said last week that the bond fund was reviewing all its accounts to determine if there were additional overcharges. It was unclear Wednesday night whether the review is complete.
Brad Schrade can be reached at 615-259-8086 or bschrade@tennessean.com
LOAD-DATE: May 14, 2009
