Refinancing portion of bonds will save money
LISBON – The automatic cuts in federal spending resulting from the sequester will have the unintended consequence of saving money for Columbiana County commissioners.
The automatic federal budget cuts spurred commissioners to restructure its financing package for construction of the new government services building, a move that will save the county an estimated $361,895 over the next 20 years.
Commissioners agreed at Wednesday’s meeting to follow the recommendation of county Auditor Nancy Milliken and retired investment adviser Greg Ewing, who has been assisting her on financial matters of this sort, by agreeing to refinance a portion of the government bonds sold to fund construction of the building.
A series of construction bonds was obtained to help fund the $10.5 million project, which opened last year and houses the county Department of Job and Family Services (JFS), Board of Elections, Veterans Services Commission, Cooperative Extension Service and 4-H program.
One of the government bonds was issued in the amount of $1.61 million through the federal Economic Recovery Zone (ERZ) program, which allows commissioners to be reimbursed for a portion of the bond interest charged the county. But the automatic federal spending cuts triggered by the sequester earlier this year will result in a decrease in the interest reimbursement for commissioners, thereby increasing the county’s bond payments.
Interest rates have dropped since the ERZ bond was issued in 2010, and Milliken said Ewing recommended the county take advantage of that by issuing a new bond at a lower rate and using the money to pay off the ERZ bond. Milliken and Ewing interviewed three firms before choosing KeyBanc Capital Markets to assist in finding an investor to purchase the new bond.
Commissioners agreed to issue the new bond in the amount of $1.68 million at 3.5 percent, which will be used to pay off the old bond. The length of the new bond was also reduced from 25 years to 20 years, with the combined changes resulting in $361,895 in savings between now and the time it is paid off in 2033.
Milliken said this should not have much of an impact on the rent charged building tenants. Eighty percent of the bond payments are covered with money from the rent-paying tenants, with the remaining 20 percent coming from the county’s debt service fund.
CapitalOne is the company purchasing the bond, and the combined fees charged by bond counsel and KeyBanc for their assistance is not to exceed $45,000, she said.