DSS loan refinancing approved
GATESVILLE – After several rounds of discussions over recent months, the Gates County Board of Commissioners have approved a financial package projected at saving the county nearly $600,000.
At their Aug. 1 meeting, the board signed-off on two resolutions that will pave the way for the county to borrow approximately $1.7 million to payoff an existing 30-year loan with USDA that was borrowed to construct the Department of Social Services building.
With that loan in hand, the county will increase their annual payments by roughly $38,000, but will pay the money back over a much shorter period of time.
Of the two resolutions, one is required by the Local Government Commission (LGC) for the refinancing of the DSS building and the other is required by BB&T to approve the financing package the commissioners agreed to at their last meeting.
During a public hearing held prior to the board approving the resolutions, Earl Rountree of Sunbury said he didn’t have a problem with this agreement.
“But the county does owe (Commissioner) Johnny Hora some thanks on this refinancing thing,” Rountree said. “He was the first to say anything about this. All of you need to recognize the fact that he did a lot of work on this. It’s also important to thank (County Finance Officer) Sandy (Pittman) for listening to this and acting on it. Johnny did the research and Sandy got it done.”
Hora, in the discussion prior to the vote, wanted to ensure that the county did not go out and borrow any more money than what was needed to pay off the USDA loan. He noted the existing balance was approximately $1.75 million, but it was to his understanding that the county will make its last payment to USDA in September, leaving a balance of roughly $1,710,000.
“I know this is a timing mechanism, but the amount we say we’re borrowing from BB&T is $1.7 million,” Hora observed. “To me the two amounts need to be the same. We don’t need to borrow any more money than what the payoff amount is on the debt.”
“We can’t put in an exact number because we don’t know which day we’ll pay it off,” said County Manager Toby Chappell.
Chappell added the payoff will be made soon after the county gains LGC approval and the final paperwork is signed with BB&T.
“We’re borrowing enough to pay the debt off,” said Commission Chairman Graham Twine.
Hora did bring up the issue of refinancing the USDA loan earlier this year. He strongly urged his board colleagues to support a refinancing deal for 10 years with annual payments of just over $198,500. He said that deal would produce a savings of $861,149.88 over the life of the loan.
However, at last month’s meeting, the board – in a 4-1 vote (with Hora in opposition) – approved a 15-year payback of the BB&T loan. That financial package (one that calls for an annual interest rate not to exceed 2.89 percent) will result in yearly payments of $150,337.34. The projected savings are $591,559.81.
Under the current USDA loan, one with a payback of 30 years, the county pays $112,337.93 annually.
In the resolution, the commissioners say that even with the increased annual payments, “the sums to fall due under the contract are adequate and not excessive for the proposed purpose because the debt already exists.”
“The Board of Commissioners of Gates County, North Carolina’s debt management procedures and policies are good because Gates County has sought approval and guidance from the Local Government Commission on both existing and proposed projects,” the resolution continued, and that “the Board of Commissioners of Gates County, North Carolina is not in default in any of its debt service obligations.”