Countdown to Valentine’s DayPublished 10:46am Tuesday, January 29, 2013
WINTON – The stage is set for a Valentine’s Day deal.
Feb. 14 is the target date for Hertford County local government officials to ink their names on a $14.25 million financing package, money that will be used to construct a new Judicial Center (courthouse) and county administration building on a tract of land along US 158 just west of Winton.
To prepare for Feb. 14, the Hertford County Board of Commissioners approved several items at their Jan. 22 meeting, all of which helps close the financing deal, one which will seek investors through the public bond market rather than a bank loan.
The first step the commissioners took in the preparation process at their meeting last week was to re-establish a Finance Corporation. Murfreesboro attorney Chuck Revelle, who serves as legal counsel to the county, said such an entity, which is a non-profit corporation, was initially established years ago when the county borrowed money to build the new jail.
“The Hertford County Finance Corporation is still in existence,” Revelle said. “Because of that fact, you do not have to create another corporation to enter into a contract to finance the construction of the new courthouse and county administrative building.”
However, the Finance Corporation does need new faces.
“Because of a passage of time we’ve lost some of the original members of that entity,” Revelle said. “We think it’s in the county’s best interest to remove whatever directors are still on that board and place three new directors – the county manager, the county finance officer and the county tax collector. These three are appointed by you (the commissioners).”
Revelle said there was a resolution in the commissioners’ meeting packet that will remove the existing members of the corporation and replace them with Loria Williams (county manager), Robbin Stephenson (finance officer) and Gay Sumner (tax collector).
The resolution was approved by a 4-0 vote with Commissioner Johnnie Ray Farmer absent from the meeting.
Also on the board’s Jan. 22 agenda were four measures dealing with the financing of the courthouse/administrative building projects through the public bond market. Those measures, all needing the commissioners’ approval, included an indenture of trust, an installment financing contract, deed of trust, security agreement and fixture filing, and a resolution approving a contract and a deed of trust.
“These are in reference to all of the work and documentation that is necessary in finalizing the public bond sale,” said Williams.
Revelle said the installment financing contract is the heart of what the agreement is all about.
“The financing of these two projects is not a general obligation bond for Hertford County; it is a limited obligation bond with the Hertford County Finance Corporation,” Revelle explained. “Through your (commissioners) agreement, you will make payments to the Finance Corporation so they can make payments on the bond.
“If you so choose not to appropriate the money, you can’t be forced to; you are not pledging the taxing power of Hertford County to do it; which you are doing with the general obligation bonds,” Revelle added. “What you are doing with these documents is agreeing to give a deed of trust, or mortgage, on the courthouse facility, and the real estate it sits on along with the county administration building. If you don’t make the payments to the corporation so that they can make the payments on the bonds then the trustee, the bond holders, can foreclose on the courthouse and administration building. That’s basically how this works.”
In saying all that, Revelle stressed to the commissioners they have a great incentive to make the payments to the corporation in order for them to pay the bonds.
“The potential buyers of these bonds know that you are required to provide a courthouse and you are in need of a county administration building,” Revelle said. “The buyers of the bonds don’t see any significant risk of you not making those payments to the corporation.”
The board granted approval to each of the four measures.
Even though the financing package is for $14.25 million for a project estimated to cost $12.225 million, Williams stressed earlier this month that the county – under the advisement of Davenport & Company, who is serving as the county’s financial advisor – added a $2 million “cushion” just in case there is a major shift in the interest rates before the Feb. 14 closing date.
“That cushion is in place just in case something crazy happens with interest rates,” Williams said in an earlier interview with this newspaper. “Right now we’re expecting a three to three and one-half percent (interest rate) on the money we need to build these facilities. If something goes crazy between now and the time we lock in our rate in early February, say the interest rate doubles to six or seven percent, this extra $2 million will cover that and we will not have to jump through all these hoops again. But I need to stress that we’re not expecting those interest rates to go any higher than three and one-half percent, especially now with the fiscal cliff issue seemingly settled.”
Now armed with the approval of items on the board’s Jan. 22 agenda, the county can proceed with gaining the blessings of the Local Government Commission, who are expected to meet on Feb. 5. By Feb. 6, the county hopes to have bond pricing and will lock in an interest rate, leading up to the scheduled closing of the financing package on Feb. 14.
It was at the commissioners’ Dec. 17 meeting where the board was first introduced to the idea of using the public bond market to finance the projects, both of which will be constructed at the Riversedge development.
Due to the current financial condition of the county as well as money saving measures previously put in place to pay for the new courthouse/administration building, no tax hike is expected to help pay this new debt.
Payments on that debt service begin in 2014. For the first six years (through 2019), those payments are estimated at between $963,431 and $1,105,036 due to the fact that the debt service on the new construction projects is combined with existing General Obligation Bonds (roughly $140,000 annually) that are still being made on a loan used to make upgrades to Roanoke-Chowan Community College. Repayment on those G.O. Bonds ends in 2019, thus dropping the total debt service payments only to the new Judicial/Government Centers (payments beginning at $941,831 in 2020 and ending in 2033 at $620,250).
Williams had previously developed a plan of how to generate the necessary revenue to match those debt service payments – $490,000 annually that county officials promised to use annually for capital improvement projects when local citizens voted to approve a local quarter-cent sales tax; an additional $100,000 in sales tax that the commissioners earlier approved to be set aside to make these debt service payments; $100,000 that the county will save in leases they currently pay to house offices that will be moved into the new Judicial Center; the $140,000 currently used annually to pay back the RCCC bonds (by keeping that amount in their annual budget); and a yearly incentive payment reduction of $205,000 beginning in 2018.
At their Dec. 4 meeting, the commissioners awarded the construction contract for the two facilities to A.R. Chesson Company of Williamston. The construction is priced at $9,983,476. The remaining costs are furnishings and equipment ($666,738), design fees and expenses ($850,306), land and right-of-way ($70,000), materials/testing/special inspections ($155,744) and contingency ($499,174).
The Judicial Center (courthouse) will be a three story facility encompassing 45,456 gross square feet. The Center will house all departments in the existing courthouse plus the District Attorney’s Office and Child Enforcement Office, both currently in Ahoskie.
Additionally, the project includes a single story Government Center (10,385 gross square feet) that will be built adjacent, but not connected, to the courthouse. That facility will house the county manager’s office, tax collection office, tax assessment office, land records, finance office and economic development (planning and zoning) office. In turn, that space in the current administration building in Winton will be used by Hertford County DSS.