Franklin County commissioners will postpone making a decision on refinancing millions of dollars of bonds until a judge rules on a pending lawsuit.
In a conference call Thursday with Franklin County commissioners and other county officials, representatives with the public finance law firm of Gilmore and Bell and Edward Jones recommended the county wait until the suit is resolved before refinancing the leasehold bonds called certificates of participations(COPs).
Mark Grimm said it is a “better course of action to hold off,” because of the uncertainty of the lawsuit.
“This is pretty disappointing to me but it is what it is,” said Presiding Commissioner John Griesheimer.
Julie Portman, principal, Edward Jones, noted that a hearing on the lawsuit is scheduled for June 18 and after that there is a 30-day period in which the judge will make a decision. Following the judge’s ruling, an appeal can be filed with 10 days.
She explained that regardless of the anticipated outcome of the lawsuit, the county should wait for a ruling.
“This is not a position you want to be in the bond market,” Jones said. “It is bad for the county and bad for bond investors — you don’t want to be the county issuing bonds and then having to pull them.
“We can’t have a chance of it going awry,” Portman added. “We, as a firm, don’t want to market a product that would not close.”
“What this is going to do is cost the taxpayers more money,” Griesheimer told The Missourian. “The longer we wait the higher rate we will have.”
Griesheimer added that he is pleased with the current interest rates which could save the county as much as $4.5 million over the term life of the bonds.
“I am extremely happy that numbers came out where they are at, and all the citizens should be happy, but I’m extremely upset that we can’t move forward until this stupid lawsuit is wrapped up,” he said.
COPs are a form of lease revenue bonds that permits the investor to participate in a stream of lease payments. COPs are not viewed legally as “debt” because payments are tied to an annual appropriation by a government body.
They are a popular financing device in Missouri and across the country in situations where there is a sufficient existing revenue stream to pay the obligations and where the government entity doesn’t have to raise taxes to repay the debt. Several other area political subdivisions are refinancing bonds to take advantage of market conditions and lower interest rates.
According to figures presented by Edward Jones, the county could save about $4.5 million by refinancing.
A suit filed by Art LeBeau, Eric Reichert and Ron Keeven claims the county’s two associate commissioners are illegally ceding authority to the presiding commissioner as a result of a commission order pertaining to the refinancing.
That order dealt with advancing the refinancing process.
LeBeau has repeatedly said the suit was not filed to prevent the county from refinancing the COPs, but all three of the men have been vocal opponents to the county’s use of the lease-back bonds as a form of indebtedness.
According to Portman, Standards and Poors reaffirmed the county’s bond rating of A+. There is a 90-day window for that rating.
The lawsuit could conclude within that time frame, she said.
“Locally COPs by the city of Washington will be on sale before ours, what kind of impact could that have?” asked Vincent.
“I don’t see that hurting anything,” said Portman. “There will be a lot of market saturation but that’s more (Edward) Jones’ issue than yours.”