Board seeks reinancingofschool debt withVPSA
By Nancy Lindsey
On the recommendation of financial advisors, the Patrick County Board of Supervisors voted unanimously (4-0) Monday night to authorize the refinancing of the 2008 school debt service bonds through the Virginia Public Schools Authority (VPSA).
David Rose, senior vice president of Davenport & Co. LLC, and Paul Jacobson, bond counsel with Sands Anderson, recommended that the board pursue that route rather than selling lease revenue bonds.
The board is taking advantage of current lower interest rates to refinance the approximately $22,000,000 school debt service which was used to expand and renovate all county schools beginning in 2008, and expects to save a total of $2,249,948 over the life of the debt, which ends in 2039.
The lease revenue bonds would generate $1,189,636 during the same period, according to the Davenport report.
The board plans to "front-load" the savings, meaning that about 90% of the savings would come in the first three years, 2016-2018, with $913,511 generated in the first year.
The board has established a minimum savings threshold of $1,250,000, and will not proceed unless interest rates remain at a level that would produce that amount, county officials have said.
The VPSA route is "far more cost-effective" than the lease revenue bonds, and front-loading would benefit the county most in terms of cash flow, Rose said.
The interest rate is expected to be about 3.22%, as compared to the current range of 3.625% to 5.25%, he said.
"You're exchanging current interest rates for lower interest rates" over a 23-year period, Rose said.
The board's vote to pass a resolution authorizing the bond sale of up to $25.8 million followed a public hearing in which Charles Vivier, the only speaker, said the board should consider all its options.
Vivier recalled his father telling him that when you take out a mortgage to buy a house, you're actually buying it twice, counting interest payments.
"The U.S. economy was based on 30-year mortgages after World War II," Vivier said.
However, he said he supported the VPSA option over the lease revenue bonds option.
Rose said he recommended that the board move forward, but said that if the minimum savings threshold was not evident in the "spring sale," which occurs April 23, the board could try again in the "fall sale" in late November.
Both Davenport & Co. and Sands Anderson will only be paid if there is a successful transaction, Rose said. Their combined fee is between $75,000 and $100,000, he said.
There is no reason to expect less than a successful transaction, Rose added, noting that the county has a "solid credit rating" according to the two major rating agencies, Moody's and Standards and Poor's.
Many localities have done or are planning to do debt service refinancing, Rose said. "We're not reinventing the wheel in Patrick County," he said.
The difference between the $25.8 million being refinanced and the $22 million still owed in debt service is placed in escrow to pay investors who purchase the county's bonds, Rose said.
Blue Ridge District Supervisor Karl Weiss, board chairman, asked if the county loses its chance at lease revenue bond sales if it moved forward with the VPSA.
Rose said that option was still available, or the county could wait for the next VPSA cycle.
Jacobson said the decision actually had to be made by April 10 and that the VPSA would begin selling bonds on April 23 based on localities wanting to become involved.
Dan River District Supervisor Roger Hayden said local governments get in trouble when they spend one-time funding for recurring expenditures.
"It's your decision how to use the money," Rose said. "It's not my role."
Referring to Vivier's comment about localities going bankrupt, Rose said Patrick County "is not like Detroit or Chicago" but is recognized nationally for its fiscal responsibility.
"I've been in favor of VPSA since day one," Hayden said. "I'd like to see Patrick County get out of debt," Hayden said, "but I'm satisfied with the resolution."
(Hayden voted against pursuing both refinancing options at the February meeting.)
Mayo River District Supervisor Danny Foley made the motion to approve the resolution, seconded by Hayden.
Hayden said he voted for the motion because when he first joined the board he asked County Administrator Tom Rose (no relation to David Rose) if he could look into refinancing the school debt.
The school improvement project should have been placed on a public referendum, Hayden said.
"The bottom line is saving $2.2 million," Tom Rose said.
In other matters, the county administrator said the board would not hold the public hearing on the county budget that had been advertised for Monday night.
No date has been set for budget discussion or a public hearing.
In the public comment session, Sidney Kirk said the Stuart Parks and Recreation Association, in cooperation with the West Piedmont Planning District Commission (WPPDC) and the Dan River Basin Association (DRBA) had received a grant to plant vegetation along streams that flow into the Mayo River.
The group plans to plant trees along the stream that runs through DeHart Park in Stuart to control erosion of the banks, Kirk said.
"We're looking at dogwoods, redbuds, or willow trees, planted 10 to 15 feet apart," Kirk said, adding that the park association would be responsible for maintenance.
Kirk said he was asking the board for permission to plant the trees on county property, and there will be no cost to the county.
The board voted unanimously to approve the project.
Following executive session, the board appointed the following members to the Emergency Medical Services (EMS) Task Force: Robert Cowdrey Jr., Ararat Rescue; Lee Smith, Blue Ridge Rescue; Pat Shouse, CCDF Rescue; Derrick Wagner, J.E.B. Stuart Rescue; Nancy Belcher, Smith River Rescue (Dustin Foley, alternate); and Harold Alderman, Vesta Rescue.
The board also appointed Sharon Wilson to the Community Policy Management Team (CPMT).