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Shelby County Fiscal Court voted Tuesday morning to issue bonds that allow a local church to refinance a multimillion-dollar project, the first time the county ever has taken such action.
No member of the public or any magistrate questioned the concept of allowing Shelby Christian Church to refinance its $4.5 million debt on a multipurpose community auditorium and fellowship hall it built in 2004 at a much lower interest rate.
To qualify for a special non-profit rate with its lender, Citizens Union Bank, the church was required to secure a bond from a government entity.
Magistrates first heard this request March 2, when the church's pastor, Dave Hamlin, came before the court to make his request.
The church’s attorney, Bill Skees of Frost, Todd, Brown LLC in Lexington, a firm that specializes in industrial revenue bonds, assured magistrates at that time that the county would neither incur any expense nor be liable for the church's debt.
Magistrates initially had questions about whether this would constitute an issue of a conflict between church and state, because they had never had a church approach them for such a reason, but they expressed no such concerns on Tuesday, apparently satisfied by information supplied by Skees.
"We appreciate you getting this information to us," Magistrate Tony Carriss told him.
Magistrate Michael Riggs said, "Since my initial concern about issuing this bond, I have received sufficient information to know that it presents no obligation to the county."
Riggs added that, as to the matter of church and state, the fact the church was a nonprofit entity is a key factor.
"It is all very legal and very proper," he said.
Skees said the church should have no trouble repaying the loan.
"You are acting as a conduit, and you are in no way responsible for the repayment of this bond," he told magistrates. "I've been doing this for 35 years, and no one has ever been held liable for payment."
The vote to approve the bond was unanimous, with the motion being made by Betty Curtsinger and seconded by Allen Ruble.
Skees also said the county "will not lose a dime of tax money" on the project.
"Unlike a normal loan, they don't have to pay income tax, so the only entity that will lose money will be the federal government," he said. "This doesn't affect the tax that is due the county, such as occupational or property tax. That's why counties don't object to it."
Currently, 44 such loans are in process in Kentucky.
The issue of industrial revenue bonds being issued to benefit religious institutions recently was examined by Entrepreneur, which published an article on a 1983 court case (Steele vs. Industrial Development Bond), in which the Sixth Court of Appeals held that the issuance of a tax-exempt bond by the Metropolitan Government of Nashville to David Lipscomb University, a sectarian institution, was not unconstitutional.
The case went to court because taxpayers in Nashville contended that the bonds, which would enable the university to renovate its campus, violated the Establishment Clause of the Constitution. A lower court had sided with the taxpayers, but the Sixth Circuit reversed on appeal.
The court concluded that the transaction did not suggest that the state endorsed the university and that the bond was merely a conduit that promoted general economic development.