County to follow dual track in refinancing 2008 school debt
By Nancy Lindsey
Financial consultants recommended Monday night that the Patrick County Board of Supervisors follow "a dual track" in pursuit of refinancing school debt that could save the county between $1 million and $2.7 million, depending on which option is chosen.
The advice of David Rose of Davenport & Company LLC (financial advisor) and Paul Jacobson of Sands Anderson (bond counsel) was to move toward the first option, selling lease revenue bonds issued by the county, while still keeping the second option open--selling the bonds through the Virginia Public School Authority (VPSA).
The school debt was incurred through $25 million in lease revenue bonds in 2008 which were used to expand, renovate, equip and furnish all seven public schools in Patrick County.
The board of supervisors voted 4-1 Monday to pass a resolution authorizing the Patrick County Economic Development Authority (EDA) to issue 2015 lease revenue bonds in an amount not to exceed $25,800 to "refund all or a portion of the outstanding 2008 bonds" to "achieve debt service savings for the county;" fund a debt service reserve fund for the 2015 bonds, and "provide for the payment of certain issuance costs of the 2015 bonds."
According to information presented by Davenport & Company, the total amount to be refunded or refinanced is $22,110,000.
The resolution puts Patrick County on the first track, with lease revenue bonds to be issued March 2, but does not bind the county to that option, consultants said.
In the meantime, financial advisors will watch the bond markets and especially interest rates, which Rose said are "at historic lows" but which have risen slightly in the past month, to determine if the VPSA option is best.
The board of supervisors plans to hold a public hearing on March 23 and make a decision at that time. Jacobson said the deadline for entering the VPSA pool is April 10 and the bond issuance will be April 23.
County Administrator Tom Rose (no relation to David Rose) said the VPSA option would be most beneficial for Patrick County, but with uncertain interest rates it should wait a few weeks to decide.
The county administrator recommended "front-loading" the savings, or taking the majority of the proceeds in the first two or three years of refinancing the debt, which runs through 2039.
With lease revenue bonds, the front-loaded savings would be $665,368 in 2016 and $313,000 in 2017, falling into the low thousands through the life of the loan and total savings of $1,044,711. Level annual savings would be approximately $60,000 to $65,000 per year, with total savings of $1,495,313.
With VPSA bonds, front-loaded savings would be $897,540 in 2016, $618,161 in 2017, and $400,318 in 2018, with smaller savings in the intervening years, for a total of $1,978,230.
Level annual savings through the VPSA pool would range from $112,000 to 116,000, for a total of $2,740,953.
The front-loaded VPSA option would generate almost $2 million in three years, Rose said.
"It would make budgeting a lot easier," he said.
The board also agreed to establish a minimum savings threshold of $1,250,000 for any option accepted.
"I feel better with the VPSA," said Dan River District Supervisor Roger Hayden. "It's historically done better. If we give you the authority to go ahead, what if the savings are less than $1,250,000?"
"It's like having a hunting license but you're not necessarily going hunting," David Rose said. "We'll go ahead, and see how the next few weeks play out."
Mayo River District Supervisor Danny Foley asked, "How much are we looking to borrow?"
"$25.8 million," Tom Rose said.
"I'm not a smart banker, but I'm smart enough to put two of the smartest bankers I know on the EDA," said Blue Ridge Supervisor Karl Weiss, board chairman, referring to Ron Haley and Bill Clark.
(The EDA met with the supervisors and financial advisors and then went into its own session, where it also approved the resolution.)
In response to questioning from Weiss, Haley said he thought the county can save at least $1.2 million in either option, at some point.
"There's no guarantee we can get it done," David Rose said. "We want everybody to understand that if the rates go up it might not be there. We could be talking to you again six months or a year from now."
Haley asked if slots would still be available for the VPSA pool in April.
David Rose said his firm actually serves as advisor to the VPSA, and entry is open-ended, without limits. If the April application falls through, the pool is open again in November, he said.
"Nobody gets paid unless it works," Rose added. "...On April 23 or 24 we'll know what we should have done."
Peters Creek District Supervisor Lock Boyce made a motion "authorizing these guys to get to work" on the lease revenue option.
Foley seconded the motion.
Hayden said the resolution states "not to exceed $25.8 million," but he noted that the recent county audit listed the school debt at $22 million.
David Rose said the total amount to be refinanced was larger than the actual debt service, but that it would end up being a couple of million dollars less.
"It will put more tax burden on us," Hayden said.
David Rose said the refinancing would actually reduce the debt service by at least $60,000 a year.
Smith River District Supervisor Crystal Harris asked the opinion of Glenn Roycroft, the Smith River representative on the EDA and chairman.
"He's my eyes and ears on the board," Harris said.
Roycroft said he thought the VPSA route was "the way to go."
"It looks like we don't have any other option," Foley said. "The VPSA looks like the best choice."
Boyce, Foley, Harris and Weiss voted in support of the motion, with Hayden voting against it.
The financial consultants are scheduled to meet with the Patrick County School Board Thursday to discuss the refinancing options.
After the meeting, Tom Rose said it would be great if the county could go with the VPSA tomorrow, but it has to "keep its options open."
Two million dollars in savings would be significant, and $2.6 million would be even better, Rose said.
"I think it's exciting," Rose said. "We can refinance the debt and save taxpayers money."
Board passes revised dog
By Nancy Lindsey
Following a public hearing with no comments, the Patrick County Board of Supervisors voted Monday night to pass a revised dog license ordinance that County Attorney Alan Black called a "housekeeping" item.
Black said the only difference is that the numbers of code sections have been changed due to changes in the Code of Virginia. He said Commonwealth's Attorney Stephanie Vipperman had recommended the revisions, and that "nothing substantive" has changed.
Peters Creek District Supervisor Lock Boyce said he thought there were potential problems with charging and fining those who violate the dog license ordinance because of incorrect code section numbers.
The apparently innocuous ordinance sparked some disagreement among board members, however.
The motion to adopt the ordinance was approved 4-1, with Dan River District Supervisor Roger Hayden casting the dissenting vote.
Hayden said he did not have a copy of the old ordinance and was not notified that the ordinance was going to be on the agenda.
Other board members said that it was on the board agenda and was also publicized in The Enterprise in both a news story and public notice.
Smith River District Supervisor Crystal Harris said the board voted a few weeks ago, at Hayden's urging, to install a plaque inscribed with the words "In God We Trust" on the podium in the boardroom.
"Now I find out that he (Hayden) is going to put it on the Wall of Honor downstairs," Harris said, pointing out that Hayden never brought the matter back to the board for consideration when the venue was changed.
"What's good for the goose is good for the gander," Harris said.
Hayden said he explained to three members of the board what he planned to do and "got everybody's permission."
Black said the general district court judge had asked that the plaque be removable so it could be displayed when the board was meeting but not when court was in session.
"He thought it might trigger a lawsuit," Black said. "There is real potential for somebody to sue you with the backing of the American Civil Liberties Union."
Peters Creek District Supervisor Lock Boyce, who initially opposed Hayden's motion because he said it could be a violation of the First Amendment, said the motto should not be placed in a secular, tax-supported courtroom.
The possibility of a lawsuit is real and other localities in Virginia have been struggling with similar issues, Boyce said.
"We've got better things to do with the Patrick County treasury" than pay for legal actions, Boyce said.
Harris said she agreed with displaying the motto but disagreed with the fact that the issue was never brought back to the board of supervisors in open session, and compared that to Hayden's complaint that he wasn't aware of the dog ordinance.
"I see you reneged," Hayden told Harris.
"I didn't renege on anything," Harris said.
The board went into closed session to discuss personnel, legal, contract and real estate matters.
After the closed session, the board approved a motion by Boyce to appoint Jerry Hopkins as an at-large member of the Patrick County Economic Development Authority.
The board also approved a motion by Mayo River District Supervisor Danny Foley to appoint Owen Caldwell to the Patrick County Planning Commission.