Penobscot County commissioners accepted the terms of a loan offer of up to $16 million — just weeks before the county was set to run out of cash.
The county’s loan will come from Machias Savings Bank, Treasurer Glenn Mower said during a County Commissioners meeting on Wednesday. It will fund the county’s spending until municipalities submit their taxes in October, Mower said.
Penobscot County received no bids on an initial $23 million loan proposal in January because its 2023 audit was not yet complete, creating uncertainty as to how the county would fund itself with little cash on hand. That came after it was revealed that years of the county’s jail budget being underfunded had created a $7 million shortfall.
Mower was able to negotiate with Machias Savings Bank to obtain this loan, but the completion of the 2023 audit is crucial in the loan being sent to the county.
The county’s 2023 audit is slated to be completed on Thursday, County Administrator Blair Tinkham said.
Negotiation was also needed because of a proposed bill in the Maine Legislature that would allow counties to declare bankruptcy. Machias Savings Bank previously lended money to Washington County, which was not able to pay back a loan in 2025 before the deadline, Mower said.
Penobscot County operates on a calendar-year system while the majority of local municipalities use a fiscal-year system. The county has to take out loans, or tax anticipation notes, in order to operate from January until the fall when communities pay their property taxes.
This difference left the county with only enough funds to operate until the end of February, Mower said. The slim amount of cash the county had on hand led to Mower negotiating with the bank and dropping the loan amount from the original proposal.
“When you’ve got nothing, you’ve got a problem,” he said.
Mower drafted the initial $23 million proposal because that was the maximum amount it could borrow under state law, Mower said.
It costs roughly $2 million a month for the county to operate, Mower said. The funding should allow the county to operate until October when communities are required to pay their taxes.
The loan approved by the commissioners has a 5.3% interest rate but the amount of interest can’t be predicted yet because the county may not use all $16 million of the loan if it’s not needed, Mower said.
Local leaders have called for County Commissioners Dave Marshall, Andre Cushing and Dan Tremble to change the county’s operating schedule to a fiscal year to solve these issues.
The commissioners are in the process of creating a budget advisory committee, Cushing said. Commissioners previously said the committee would be made of finance directors and other local officials who could help the budget process and the transition to a fiscal year.
While commissioners have not shared any information about how many people will be on the committee or what criteria members would have to meet, a change to the county’s audit review has been proposed.
The county will publicize requests for proposals for additional support to help in the process for the 2024 and 2025 audits on Feb. 9, Tinkham said.
“Hopefully everyone understands that this is one more step in making sure our financial house is in better order,” Cushing said about the loan.