Published 7:34 am Thursday, December 20, 2012
WINTON – A new plan of action has developed to finance Hertford County’s $12.225 million Judicial Center and Government Center.
At their regularly scheduled meeting here Monday night, the Hertford County Board of Commissioners approved a series of measures that will tap into the public bond market as a means to bankroll the two projects, to be built at the Riversedge development along US 158 just west of Winton.
Ted Cole of Davenport & Company, who is serving as the county’s financial advisor on this project, unveiled the plan to the commissioners. He began his presentation by explaining that the county did not receive any proposals from the banks it solicited to provide financing.
“That’s not terribly surprising when you get to the larger dollar projects with longer (payment) terms like the one you are planning,” Cole said. “Sometimes banks will become less competitive and less interested in these types of financing scenarios.”
Cole offered an alternative plan – the public bond market. There, the county can tap into a broad range of investors who are interested in purchasing municipal tax-exempt bonds.
“It’s a very large market,” he said. “It’s very frequently used for local government projects such as yours. It provides very competitive fixed (interest) rates. Those rates are now at their lowest (3.27%).”
If there is a downside to seeking funding through public bonds it comes to more “moving parts” involved in the process.
“Bank financing is a fairly streamlined process,” Cole noted. “With public financing, you need a bond rating, a bond counsel, financial advisor, an underwriter and a counsel for the underwriter. It’s more complex, but you have experienced people serving in those roles.”
The process to fill those roles has already begun and the Roanoke-Chowan News-Herald asked for and received the estimated costs ($315,000) to seek issuance of the limited obligation bonds. The lion’s share of those costs ($249,295) will be paid to those listed by Cole in the above paragraph, to include Davenport’s fee of $85,000.
“There are some additional costs you will incur with this particular funding process than you would within traditional bank financing, but at the end of the day you will come out ahead with the rate and the annual payments,” Cole said. “We’ve done this enough to know that these public markets can give you the lowest annual rates.”
Cole explained that the bond trustee will hold the dollars for construction and the county will requisition those funds out and pay the bills.
“As you make your debt service payments over the next several years you will send that money to the bond trustee who will make certain that it gets dispersed to all those bond buyers,” he said.
Cole said thanks to the county’s foresight to begin putting money aside for this project years ago, paying that debt service without impacting the current tax rate should be realized.
“Your county manager has done an excellent job of looking at what the annual debt service will likely be and identifying sources of revenue to repay that debt,” Cole stated.
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).
County Manager Loria Williams previously developed a plan of how to generate the necessary revenue to match those debt service payments, no matter which funding source the county pursued in financing the two new projects.
Cole pointed out those revenue streams during his presentation…..noting the $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.
“There is not an additional impact associated with this project beyond the sources of revenue already identified,” Cole stressed. “You have the dollars to make these debt service payments in full. You are in very good shape with this financing and repayment plan. You have a solid plan. In fact, you’re a little bit to the good; you have a little bit of cushion.”
The next steps in the process have been scheduled, to include the commissioners next meeting (9 a.m. on Monday, Jan. 7) where the board can hold a public hearing and choose to adopt a “findings resolution.” One day later (Jan. 8), the county hopes to submit a final application for this plan to the Local Government Commission for their approval when they 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 closing of the financing package on Feb. 14.
“A comment you made about no additional burden on the county’s budget with this financing…I know that nothing right now is etched in stone, but I feel it’s very important that the public needs to know that property taxes are not going to shoot sky high with this project,” said Commission Chairman Curtis Freeman. “What I really like is what you said about no additional burden on our tax rate based on the revenue producing plan we already have in place.”
Williams said the reason behind already having a stable plan in place to make the debt service payments is due to the county citizens voting for the quarter-cent sales tax.
“They trusted us to do what we stated we would do with those dollars and that was to use it for capital improvement projects such as the one we’re getting ready to start building,” Williams noted. “We have set that money aside every year since that favorable vote and will continue to set it aside until this debt is paid off. The citizens made this happen. Without that quarter-cent sales tax we would have not been able to do this project.
“This board also needs to be commended for making certain that the processes we put in place, setting aside an additional $100,000 in sales tax, helped relieve any possible extra burden that may have been placed on the citizens for this project,” Williams added. “You need to thank yourselves for having the foresight to allow me to do that.”
“This work that Ms. Williams and Chuck (Revelle, legal counsel to the board) have done on these documents presented here tonight is really great and I say job well done and I applaud you both for it,” said Commissioner Bill Mitchell. “For those citizens not here tonight to hear this, you need to know what a great job Ms. Williams does for Hertford County. Sure, the county citizens need to be commended as well for approving the quarter-cent sales tax, but this other portion will be paid solely by the good financial sense Ms. Williams has put into this project.”
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.