Central Middle School construction loan modified
Published 5:23 pm Tuesday, November 30, 2021
GATESVILLE – A decision made here recently will save Gates County taxpayers nearly $870,000.
At their regularly scheduled meeting on Nov. 17, the Gates County Board of Commissioners agreed to modify an existing loan at a lower interest rate. That loan, one used for the construction and renovations made in 2018 at Central Middle School, currently has a $7,750,000 balance and a 3.90% interest rate. The original loan was for 20 years.
At the Nov. 17 meeting, County Manager Tim Wilson told the board that with the assistance of Davenport Public Finance, an examination of the county’s existing debt was performed in an effort to reduce or restructure any loans.
“It was determined that one loan, being a 2018 Installment Financing Contract with Sterling National Bank, presented a possible opportunity,” Wilson said.
He added that after receiving four proposals, the most beneficial one would be a loan modification by the current leader, Sterling National Bank. Wilson said the loan would be modified to a 2.30 percent interest rate, but would remain on its current repayment schedule (ending in 2038).
“The lone stipulation to that is that the county promises not to seek to refinance or pay off this debt over the next 10 years, until December 2031,” Wilson advised the board.
Wilson said the lower interest rate is estimated to save the county $862,121 over the life of the loan. With the current loan amortization, that works out to an approximate savings of $50,000 per year (based on 17 years left on the loan).
He added that if the commissioners agreed to move forward with this loan modification, the proposal still requires the approval of the North Carolina Local Government Commission.
The board conducted a required public hearing regarding the loan modification to which no one spoke in favor or in opposition.
Ted Cole with Davenport Public Finance said the proposal made by the current leader – Sterling National Bank – was much more favorable than the others submitting proposals.
“They [Sterling] waived the pre-payment penalty and lowered the interest rate from 3.90 percent to 2.30 percent,” Cole said. “You’re not extending the debt, you’re not shortening the debt….the amortization stays exactly like it is right now. You will pay it off at the exact same pace had you done nothing. But with a lower interest rate you save money over the life of the loan.
“We are currently in a lower [interest] rate environment,” Cole added.
With that, the board approved a resolution that modifies the 2018 Installment Financing Contract with Sterling National Bank.
It is expected that the loan modification will be in place as early as Dec. 9.