Savings identifiedPublished 8:43am Monday, February 25, 2013
JACKSON – Northampton officials have agreed to work with a firm on refinancing debt which has the potential to save the county over $1 million.
On Monday, the Northampton County Board of Commissioners approved Finance Officer Dot Vick and County Manager Wayne Jenkins to move forward with refinancing the county’s long term debt using Davenport & Company.
The proposal to the county is to have the firm act as the county’s advisor in identifying and analyzing all debt obligations for potential refunding opportunities as well as assisting in finding a way to refinance that debt.
According to information provided by Vick, the county had been contacted by several agencies specializing in debt refinancing to assist in the process. The county has several bond issues that appear to have considerable savings if refinanced.
The matter was taken to the board in November and the commissioners in turn directed Vick to investigate, but obligate no funds and bring it back before the board at a later date.
Ted Cole and Bob High presented the firm’s proposal to the board. They met with Vick and Jenkins to discuss the potential opportunity to refinance debt.
“Some of them were originally issued for county purposes, governmental or school purposes; others were issued for utility purposes,” Cole said.
He continued by saying the firm had initially identified five different potential bonds that were issued through the course of 2000, 2002, 2003 and 2005 with about $14.5 million of outstanding debt.
“What we’re talking about is maintaining tax exempt fixed rate debt, we’re not changing anything in regards to the tax status or the fact you have fixed rate debt today, meaning if you do nothing we know exactly what the payments would be going forward,” he said. “What we’re proposing to do would maintain that certainty, would maintain those fixed rates just at a lower interest rate than what we have today.”
He added what the firm would do would either maintain or shorten the payback and the reason for the potential refinancing lies in the current favorable interest rate environment.
“There are a number of different types of financing that you all could pursue to do this, you could deal directly with a bank or a number of banks or you could go through a public bond issuance like you have done past for some of your general obligation bonds,” Cole said. “We would assist in identifying which option would be most beneficial and then ultimately present all of those findings to the board, work with your other service providers to put the transactions in place, put the documents in place and ultimately effect the refunding.”
Jenkins said there is a potential for a gross savings of $1.38 million and the majority of that debt would be saved on the general obligation from water/sewer bonds and the construction of CentralElementary School.
“The bulk of the savings would not be realized by the average taxpayer so to speak, but by (Public Works Director) Mr. (Jonathan) Morris’ water and sewer customers,” he said. “But there is still a $1.3 million opportunity here. There could be others as Mr. Cole mentioned that he’s not looked at our entire debt yet.”
Jenkins added if the county chose to refinance through a bank the fixed fee would be $50,000. Meanwhile, refinancing through the public bond market there would be an $85,000 fixed fee.
“The $1.3 million savings is net savings, the fees are already taken out of this,” he said.
Cole said the five debts that have been identified thus far have interest rates in the range of four to five percent. With the current favorable interest rates the firm estimates those new rates could be in the 1.5 to 3.25 range.
“It depends on how long each of those five loans pays off,” he said. “For those five loans the savings that we’ve identified and estimated is right at $1.38 million.”
Commissioner Fannie Greene questioned what determined whether the loan would be refinanced through private or public.
“The primary point of determining that decision is the amount of debt we’re offering, generally speaking banks prefer that a loan be designated bank qualified and that means $10 million or less in a given calendar year,” Cole said. “Also the final maturity, banks prefer to go out really no longer then 15 years.”
High added the ultimate go between the bank and the public offering is which brings the most value to the citizens of the county.
“Our fees are higher with the public offering, but if the savings are much higher than that and there are other fees with the public offering that make it more expensive, but if we could get a lower interest rate in better terms then we would bring it back to you with a recommendation,” he said.