After an 11th hour change in interest rates, Franklin County will pay an extra $30,000 on the first bond issuance for the jail/911 rehabilitation project.
Just weeks after entering in to an agreement with underwriting firm D.A. Davidson as the underwriters for the county jail/911 rehabilitation project, Presiding Commissioner Tim Brinker says they will never do business with the county again.
“To say this took us by surprise is an understatement,” Brinker said. “Unfortunately there is no legal discourse except to say it would not be desirous to hire them again.”
The original agreed rate on the bonds would be 3.69 percent, leaving the total debt service to the county at $14.35 million to pay back over 20 years on the $10 million bonds.
Instead, at the last minute, the Iowa-based underwriting firm told the county it could not sell the bonds at the current rate due to market volatility.
D.A. Davidson then raised the rate .04 percent to 3.73 percent, which equates to an additional $30,000.
Brinker added the commission was advised by bond counsel that last-minute rate increases are not common, but not uncommon either.
“We were told it would be best to hold our nose and swallow this than to throw everything out and reload,” Brinker said. “The commission votes in favor of this reluctantly as it reflects to D.A. Davidson. They will be hard-pressed to do business with this county again.”
First District Commissioner Todd Boland explained the county’s hands were essentially tied in this situation since the percentage rates of the nearest competitor to D.A. Davidson were 0.12 percent higher, equating to about $100,000.
“They sprung this on us at the last minute and knew they were still lower than the second lowest bidder,” Boland said. “We offered to split the difference with them and they wouldn’t even negotiate.”
The commission hired D.A. Davidson in mid-October.
Despite their displeasure with the underwriter, the commission moved forward with the bond issuance Tuesday, which is the first of two associated with the estimated $30 million jail/911 project.
The actual amount of the bond purchased by The Bank of New York Mellon Trust Company, N.A., is $9,925,000, with $65,000 going toward bond counsel fees and $12,000 to WM Financial for their work on the bonding process.
The county has been working with St. Louis-based WM Financial Services on preparing the bond issuance and in mid-September hired S & P Global in New York to analyze the county’s current financial status, which resulted in an A-plus credit rating.
There are additional, smaller fees associated with the preparation and issuance of the bonds as well.
The bond issuance is coming at a time when the jail project costs are expected to increase rapidly.
Between August 2017 and August 2018, the county has paid consulting firm Navigate Building Solutions $79,943.
From July to December 2018, the county will pay Navigate $60,906 per month, totaling $395,885.
The architectural firm will be paid about $2.1 million for its services to the end of the project in 2020.
According to county documents, FGM Architects will be paid $218,612 per month from July to December 2018.
The county has a permanent revenue stream in place to pay back the construction notes.
In April, residents approved a half-cent Proposition P sales tax expected to generate $6 million per year in additional revenue.
The monies will be split equally with $3 million each year going toward the jail/911 renovations and the other $3 million funding law enforcement salaries.