County to refinance schools
By Steve Herring
Published in News on February 10, 2016 1:46 PM
Wayne County can expect to save nearly $3 million over the next 19 years by refinancing the $38 million it cost to build new middle schools in the Grantham and Spring Creek communities.
That savings could then be directed to other county projects such as a new 911 call center, County Manager George Wood said.
Wood's recommendation to refinance the loan was unanimously approved by Wayne County commissioners during their Tuesday, Feb. 2, session.
The county entered into the 20-year loan for school construction with SunTrust Bank on July 14, 2014, at an interest rate of 3.55 percent.
Wood told commissioners that he, Assistant County Manager Tommy Burns and Finance Director Allison Speight had been working with Davenport and Co., the county's financial consultants, that recommended the refinancing.
The recent bond market will allow the county to refinance over 19 years at 2.739 percent, Wood said.
The refinancing would not reduce the term of the loan, but would save the county $2,945,896 after deducting bond issuance costs and other fees, he said.
There is no penalty for paying off the existing loan early, Wood said.
"I want to stress that the favorable market conditions can change positively or negatively, during the approximately 75-day process," Wood said. "That is why our agreement with the professionals working on this (Davenport, bond counsel and bond underwriter) would be that they would not be paid unless we actually closed on this transaction.
"This would be a negotiated, not a competitive bid, issuance of limited obligation bonds. It would entail our getting a bond rating from at least Moody's Investor Services, and possibly from S and P (Standard & Poor's). We estimate that we should be in the range of a AA minus rating."
Wood suggested two options.
The first would be for Davenport to contact SunTrust Bank to let it know the county is contemplating refinancing, which would pay off the loan.
"They would be asked if they are interested in voluntarily agreeing to lower their interest rate to the then prevailing market rate," Wood said. "Second, if SunTrust does not want to do so, Davenport would proceed with the 19-year term, negotiated sale of new limited obligation bonds that would be used to pay SunTrust, and leave us with a lower interest rate."
Wood reminded commissioners that they have been discussing a new 911 center building that would cost approximately $2.5 million. The computer and other electronic equipment would cost about the same.
"This $2,945,000 in savings over a 19-year period would cover a large portion of the proposed 20-year debt service necessary to fund this project," Wood said. "In addition, I had Mrs. Speight update our emergency telephone system fund's reserve. At June 30, 2015, per the audit, we had $1,662,950 on hand.
"For the fiscal year 2016 budget, we appropriated $287,028 of that fund balance. That would leave $1,375,922 available for this project. Adding the $2,945,000 to that number would give us $4,320,922 toward the funding of this approximately $5 million project."
The only additional expense would be the interest on the debt service, he said.
It is also possible that the county can convince the State 911 Board to grant funding for some of the equipment costs, Wood said.
In another issue dealing with the 911 center, commissioners tabled action for two weeks on a study and design contract.
Wood is negotiating the contract with Stewart-Cooper-Newell Architects.
Negotiations on the design portion of the contract have been completed, but not for the study, Wood said. He asked for the two-week delay to complete that portion of the contract negotiations.
The county wants the company to look at five possible locations for the new 911 center. All five are on county-owned property at or near the county's facilities building near the old Wayne Community College campus.
The five options are:
* Renovate two buildings in front of the facilities office and possibly add on to the buildings.
* Renovate the facilities office and move that department elsewhere.
* Renovate the existing brick building at the communications tower site.
* Build a new building behind the animal shelter.
* Build near the communications tower.