Bank loan will pay for radio system
By Steve Herring
Published in News on November 9, 2008 9:27 AM
The bank-qualified financing the county will use to pay for a new $9.7 million communications system is similar to how a person would finance a house, County Manager Lee Smith said.
In this case, instead of a house serving as collateral, it will be the radio system.
The county settled on this method of financing because it is simpler, faster and less tedious in terms of paperwork and legal issues than other options such as bonds, Smith said.
"If you borrow less than $10 million in a calendar year, you can do it as bank-qualified financing," Smith said. "It is not as expensive (as other options) and you can go straight to the bank and not the bond market.
"Things are not selling on the bond market. I think some are pulling back from projects to look at bank-qualified financing."
The system includes the purchase of between 1,500 to 1,600 radios for all fire departments, rescue squads and law enforcement agencies in the county, two towers -- one to be built in Mount Olive and the other in Grantham -- and buildings to house the equipment, computers and other "back room equipment."
The project and its financing package have been approved by the Local Government Commission -- a requirement before the project could proceed.
Smith said the commission scrutinized the project before granting approval.
For example, to build the two towers involved in the project, the county had to have a lease or deed to the land on hand. Also required in advance were "very detailed" contract information and specifications of the radio system.
"They (commission) want to know what you are doing and what you are going to collateralize and how it will be repaid and the terms with the bank," Smith said. "They also look at your financial ability to repay the loan. They look at your administration, how you manage money, not just this year, but several years back, and your credit worthiness. The Local Government Commission felt great. We had no problems at all because we demonstrated to them our ability to pay, first of all, and where we were financially and they felt strong about our cash position. Even with the economy the way it is, they looked at Wayne County and said 'they do have the ability to pay it back.'"
Smith said the project was properly collateralized.
"We didn't stretch it out, we just did 10 years since the system is going to be here for more than 20 years," he said.
Smith said it is important to realize that the county has been looking at a new communications system for the past four to five years.
"So it isn't like it is something that has just happened in the last month or two," he said. "It has been a process of assessing what the needs are. The current system is 40-45 years old. It is a system that is failing."
Committees made up of fire departments, emergency medical services, Highway Patrol and municipalities determined the county needed the system, he said.
An engineering study looked at the types of systems and the new digital technology.
"One thing we are trying to do is stay ahead of the curve on technology that is being prescribed by the federal government," Smith said. "There are time frames in which governments in this country have to move from old analog-type systems to digital. There are mandates and we are trying to meet those mandates in order to meet timelines of five, 10, 15, 20 years.
"So we are not building something that in 10 years you are going to have to change technology. We were trying to meet those long-term federal goals as well as what our needs are here. What we have done this year we put together our Local Government Commission application and began looking at as to how this thing can be funded. You know, you are talking about a system that is approximately $10 million. We did go out for bank bids and RBC got the nod with a percentage rate of 3.88 percent over 10 years."
County commissioners have approved the project, and the county is moving forward and hopes to begin purchasing some tower equipment within the next 90 days.
Smith said that since a "lot" of the purchasing can be done on state contract that the county can "piggyback" its purchases on existing contracts.
"You can find like equipment and piggyback on someone else's bid within a certain time frame," he said. "That saves money and time.
"The biggest issue was that it (system) is a necessity. It is not like building something I would like to have. This is something that we absolutely have to have. This is an absolute need, not a want or a desire. This is something we need to meet federal standards, but also just to meet the basic communication needs of emergency personnel and law enforcement in this county."