Franklin County has finalized the sale of two certificates of participation (COP) totaling $46 million over the next 20 years.
According to the Franklin County Clerk’s Office, the certificates carry a fluctuating interest rate of between 3 and 4 percent and have a payoff date of 2038.
The largest certificate was for $26,035,000 and was purchased by The Bank of New York Mellon Trust Company to refinance capital improvement bonds originally sold by the county in 2012.
Certificates of participation are a method of obtaining a loan that is similar to a bond issue.
Presiding Commissioner Tim Brinker says refinancing will save the county approximately $2,612,000 over the next 13 years.
“Just as individuals refinance home loans when interest rates decline, the county was able to take advantage of current low borrowing rates,” Brinker explained. “Since the beginning of the year, interest rates have declined by more than 1 percent.”
The county’s financial adviser, Joy Howard, principal of WM Financial Strategies, indicated that in addition to extremely favorable market conditions, the high savings were facilitated by a competitive proposal process for the sale of the certificates. In all, four proposals were received and Stifel, Nicolaus & Company was selected as the underwriter for the sale of the certificates.
The refinancing was completed in tandem with the county’s sale of a $20,025,000 COP to finance additions and renovations to the existing county public safety facility.
Those capital improvements will include the addition of a new jail and a new 911 communications center, and renovations to the existing facility for expanded sheriff’s department operations.
The total estimated cost of this project, including contingencies, is $32,700,000 of which a portion is being financed with county funds and from previously sold certificates of participation.
These certificates will be paid with revenues from the county’s Proposition P sales tax that was approved in April 2018. Just as taxpayers will benefit from the refinancing, taxpayers also will benefit from the sale of these certificates of participation at historically low interest rates.
The county issued the first jail construction bond for $10 million at a 4 percent interest rate last November.
Between 2005 and 2008 Franklin County took on about $32.5 million in debt with the construction of the badly needed government and judicial buildings in Union.
In 2005, the county issued $6,910,000 in certificates of participation (COP) for the construction of the new administration building. The building was completed in 2007.
In 2007, the county issued $18,450,000 in COP, of which $7,205,000 was for construction of the judicial center completed in 2008.
The additional $11,245,000 was used for converting county gravel roads to hard surface.
In 2008, the county issued $13,885,000 in COP for additional construction projects, including $1,412,019 for remodeling the historic courthouse, which was completed in 2010, $1.3 million went for updating the HVAC system at the jail and $10 million for the roads program.
An additional $1,172,981 went into a reserve fund.
In all, the COPs generated $39,230,000 in total debt.
According to the 2019 county budget, every year between 2013 and 2032, the county was making average payments of just under $3 million on the debt.
Unlike in the past, Franklin County voters have approved a permanent funding stream to pay for the jail renovation in the form of the Proposition P half-cent sales tax.
In April 2018, county voters approved the permanent half-cent sales tax that at the time was expected to generate more than $6 million annually.
Half of that will go toward debt service on the jail and about $2.4 million annually will go toward the construction bonds. An additional $300,000 will go toward new jail staff and another $300,000 will go for 911 upgrades.
The other approximately $3 million will go toward law enforcement salaries.
As of July, the Proposition P sales tax has already generated more than $4.2 million with some of the highest sales tax-generating months forthcoming.
Thus far in 2019, the Prop P sales tax is averaging $529,607 per month and if current economic trends continue, and depending on consumer confidence, the new tax is on track to generate $6.3 million in 2019 in public safety sales tax revenue.