County hears 2nd proposal for refinancing
Published 12:00 am Tuesday, July 10, 2012
Commissioners heard a second proposal Monday for refinancing more than $7 million in outstanding debt and adding $1.5 to $2.2 million in additional debt for road-paving projects.
Reid Cavnar of Merchant Capital submitted a proposal that nearly mirrored a previous proposal by Walter Lewis with Gardnyr Michael Capital Public Finance, a Birmingham investment-banking group.
Both men said refinancing at current low interest rates could generate the additional revenue without increasing the annual amount the county pays to service that debt. It would, however, extend repayment time.
Currently, the county two series of outstanding GO warrants, issued in 2002 and 2005. Of those, only 80.5 percent of the 2005 series are eligible for refinancing. The balance on the 2002 series is $1.025 million, with a 4.03 percent interest rate and an annual payment of $232,838. Payoff is in 2017. The 2005 series has a principal balance of more than $6 million with a current payoff in 2032. The annual payment is $552,000 or $46,000 per month. At its current 4.32 percent interest rate, payoff is slightly more than $10 million.
“The average interest rate on both together is 4.66 percent and could drop below 3 percent, saving the county somewhere around $250,000 by refinancing,” Cavnar said. “That tells us this refinancing is worth doing.”
If the county adds $1.5 million in debt, it will take an additional eight years to retire the bond issue; if it adds $2 million, it will take the county an additional 10 years to pay off the bonds.
Cavnar said commissioners must decide how and when to proceed. Commissioners can choose these options – to not include any new debt, thereby paying off the county’s long-term debt more quickly, or to increase the debt.
“The bond market is so volatile,” he said. “People are shocked to learn what a small change in the interest rate can mean. When you talk about that number in terms of dollars, it can mean a tremendous savings.”
County administrator Brenda Petty said the local Regions Bank will also submit a proposal to refinance the bonds, but will not do so at a public meeting. Commissioners will make a decision the July 23rd meeting.
Petty also said commissioners have discussed using any refinancing proceeds as a match for an estimated $10 million in road and bridge projects. The money is available through the Alabama Transportation Rehabilitation and Improvement Program (ATRIP); however, a 20 percent project match is required.
In March, the county announced it would pursue $5.6 million in ATRIP funding to complete four bridges and eight road projects totaling 37.58 miles. County engineer Darren Capps said Monday that list has expanded. See the Wed., July 12, edition for more on these road projects.