"That is why we came down and met with the court back in 2001 to make sure they understood," he said.
Teater said he was told by John Anderson, a former chairman of the Garrard County Memorial Hospital Board, about the penalty.
"I went over ... and I talked to Louise (Thompson, county treasurer) and she called KACO right then, and they said, 'You cannot pay on it. If you do, you will have to pay a penalty.' "
Two magistrates, judge-executive say sale is still good for the county
Two other magistrates and the judge-executive, however, said the farm sale is still good for the county.
"I think it needed to be sold because it wasn't producing anything," Leavell said. "It was dead weight."
The farm, he said, is "a thing of the past" - a pre-welfare relic where the poor and the homeless could live.
"It's not a mistake because the farm wasn't making that much money," said Magistrate Walter "Tiddle" Hester. "It was only generating two to three thousand (dollars) a year from what I understand. It's gonna generate a lot more than that in interest."
Judge-Executive E.J. Hasty said he expects the farm to bring about $400,000 at Saturday's auction.
"If you find somewhere that they'll give you 2 1/2 percent interest, that's $10,000 a year and you ain't touched nothing."
In a special session of the court Saturday morning, Hasty told the magistrates that income from the county's new insurance tax should generate $350,000, the occupational tax likely will raise $250,000 and the farm sale should bring $400,000.
KACO loan payment is $314,686
The KACO loan payment for the year is $314,686, which, subtracted from the $1 million projected from taxes and farm sale, leaves $685,314. Hasty said the county wants to invest the remainder in bonds or certificates of deposit, the proceeds from which would be used exclusively for the loan.
"It needs to be put in where it can't be touched," Teater said.
"Should we go out of office, whoever comes in shouldn't be able to touch that."
Satterly, in a letter to Hasty last week, said in 2001 the county chose a fixed-rate loan over one with a variable rate. Although a fixed rate would be more stable, the county would "forego its ability to make unrestricted principal payments." Any principal payments different from the agreed-upon schedule would trigger a penalty. In this case, he said, it would be about $660,000, "an amount larger than the payment you wished to make."
Instead of the lump-sum payment, Satterly suggested the county buy certificates of deposit with the procees of the farm sale. They would allow the county to make its annual principal payment over the next five years.
"This would mean that every dollar of the sale would be used to retire principal on this (loan) and that the money would be earning you interest in the interim," he wrote.