Officials will likely make decision on bond financing Tuesday

Grady County commissioners met Tuesday afternoon with a bond attorney and bond underwriter to discuss possible bond financing for the construction of the 960-acre Tired Creek lake.
Cliff C. (Bucky) Kimsey, III, of Morgan Keegan & Company, and Jonathan Pannell, of the Savannah law firm of Gray & Pannell, met with county officials this week to discuss financing options available to the county.
Both men worked with the county previously on a bond issuance in conjunction with the most recent Special Purpose Local Option Sales Tax referendum.
They have also worked on bond issues for projects in Colquitt, Mitchell and Thomas counties through the South Georgia Governmental Services Authority, of which the city of Cairo is a member.
Pannell explained the differences between general obligation bonds and revenue bonds. He informed commissioners that the county could seek the approval of the SGGSA to issue revenue bonds on behalf of Grady County. An intergovernmental agreement would require the county to pay off the bonds and the SGGSA would only serve as a conduit for the funding of the lake project.
“The advantage of going with a revenue bond is you can do it now,” Pannell said.
He said that the process would take from 90 to 120 days before the money would be available to the county. On the other hand, Pannell said a general obligation bond must be approved by the voters of the county and scheduling a referendum and the process involved in the bond issuance combined would cause a delay anywhere from six to 12 months before bond proceeds would be available to the county.
“After looking at it and researching the revenue bond law, it specifically says dams and reservoirs are authorized undertakings and this project fits very well under the statute. If this commission decides to move forward, Grady County would ask the authority through a resolution to issue bonds on the county’s behalf. The authority would have no administration or control over the project. The county will manage and build the lake using the bond proceeds. That would be our recommendation to the board,” Pannell said.
According to the Savannah attorney, the SGGSA has worked with other neighboring municipalities and school systems on a half-dozen projects utilizing revenue bond financing.
Commissioner Charles Norton questioned what “revenue” would be earmarked to pay the bonds. Pannell explained that the county would be pledging contract revenues through the intergovernmental agreement to pay back the bonds. “You would budget on an annual basis whatever money available to pay back the authority. It is a full faith credit pledge,” Pannell said.
Kimsey and Pannell also shared information about Recovery Zone Economic Development Bonds, which were made available through the federal stimulus program passed by Congress last year.
Although the deadline for application for these federally subsidized bonds has passed, Georgia Department of Community Affairs officials have said the county could still make application.
Pannell warned that there is action pending in Congress regarding states’ actions, including Georgia’s, to take control of the bonds and allocate the bonds to various communities based on applications. According to Pannell, members of Congress have taken issue with the states interfering with the congressional intent to allocate the bonds as stated in the federal Recovery Act legislation.
The commissioners were told Grady County was allocated only $700,000 for recovery bonds to be used for governmental uses, but there is the possibility the county could be awarded a higher allocation. State officials say no applications will be approved until a decision is made in Washington, which could also delay the county from having access to the bond proceeds.
During the meeting Tuesday, Kimsey shared a variety of debt service schedules for a $15 million bond issue.
“I never tell people to borrow money just because interest rates are low. But if you have projects that you need to issue debt for, then it is a very nice benefit to have a very low rate,” Kimsey said.
Although bond rates are not at historic rates like home mortgage rates, Kimsey said the rates are very attractive right now and based on the county’s financial position and financing needs bonds would be a very “workable situation.”
Chairman Al Ball asked if the county proceeded with the bond issue and then later received a substantial grant whether or not the grant proceeds could be used to pay down the bond debt.
Kimsey explained that the bond issue could be offered in such a way that the county had certain call provisions, which would allow the commissioners not only to pay off the debt earlier, but it could also be a tool to refinance the debt should bond interest rates fall even lower.
He also advised certain provisions could cause the county to have to pay more in interest.
Commissioner Elwyn Childs asked for Kimsey’s opinion as to whether it was better to finance the bonds over 20 or 30 years.
“The best overall is the shorter time period. However, your debt service might be easier to do it for 30 years,” Kimsey said.
County Attorney Kevin S. Cauley, who has had discussions with both Pannell and Kimsey extensively, advised the commissioners to consider upcoming expenditures associated with the project.
“You need to contemplate that we will need cash,” Cauley warned, and suggested commissioners not deplete the county’s cash reserves.
The county attorney said the county could use a portion of its cash reserves to finance the bond debt over the next several years until the next SPLOST, and a portion of the penny sales tax could be designated for debt reduction and could be used to retire the bonds without monopolizing the entire SPLOST proceeds.
“You could pay for the lake potentially without ever hitting the general fund,” he said.
The attorney warned that if the county opted for a higher debt service option the commission could deplete county resources just at a time when the county will need “a lot of cash quickly.”
Last week the county authorized $238,349.50 in survey work to survey the mitigation tracts identified in the county’s lake permit from the U.S. Army Corps of Engineers.
The tracts must be properly surveyed before the county can close on the purchase of the tracts and the cost of mitigation land acquisition has been project to be $1 million.
Cauley also noted that the cost of the dam design was roughly estimated at $800,000 to $1 million and that money would be paid out over an eight to 10 month period.
“The big issue we have is timing. Interest rates and construction costs are sure to rise. Our permit says we must finish the project in five years and the engineers say it can be done,” Cauley said.
The county currently has $6,552,951 in cash reserves. Of that the board has reserved $2,700,000 as a three-month operating reserve. That leaves $3,852,951 that can be tapped into to pay the surveying costs and the purchase of the mitigation tracts as well as debt service on the bonds. Should the board agree with the bond financing the county can reimburse the reserve account for those expenses.
Proceeds from the harvest of timber from the lake bed, which previously was estimated to generate between $2 and $3 million could also be used for capital expenditures or debt service on the lake project.
Chairman Ball also asked if it was possible for the county to issue $10 million in bonds and then if necessary down the road issue more bonds should federal or state funding not materialize.
Kimsey, Pannell and Cauley all agreed that was a possibility, but also noted that the costs of issuing two series of bonds would be more expensive.
Scott Higginbotham, a local Edward Jones investment representative, also attended the meeting Tuesday and expressed his desire to be involved in the process. Kimsey said that it would be possible for Higginbotham to have access to the bonds to sell to local clients.
The Edward Jones associate said that a recent bond issued for Archbold Hospital had attracted local investors and he commented, “investors are clamoring for tax-free investments right now.”
Commissioner Bobby Burns asked when the board would have firm figures on the various costs related to the project. Cauley said the exact cost of the mitigation tracts acquisition would be known shortly and the cost to do the mitigation work would be known as soon as bids are solicited for the work. The county attorney said the exact cost of the dam design would not be known for another eight to 10 months and at that time the project could be bid and the actual cost of the construction would be known.
Burns acknowledged the real urgency to proceed with the bond issue is to lock in the low interest rate.
After additional discussion, Chairman Ball instructed County Attorney Cauley to prepare the resolution calling for the SGGSA to issue the revenue bonds on the county’s behalf.
Ball said the resolution would be included on the agenda for the county’s July 20th meeting and commissioners would have between now and then to consider the presentation made this week before voting to approve the resolution or not.
The commissioners will meet next Tuesday at the courthouse beginning at 6 p.m.

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