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The consultants hired by the Grady County Commission last December to advise county officials on financial matters told members of the Grady County Lake Authority Monday that the fees the firm will charge the county for consulting services have not been determined at this date.
Until just recently, the members of the lake authority had not been involved in efforts by the county staff and representatives of Davenport & Company to plan for a refinancing of the 2010 revenue bonds issued for the construction of the Tired Creek Lake dam. On Monday, the authority was asked to approve a recommendation that would put into motion a process with the goal of closing on a bond refinance deal by early August.
Three members of the authority, Chairman Steven Childs, Laura Register and Eric Cohen, all pressed Davenport First Vice President Ricardo Cornejo and Vice President Doug Gebhardt on what the cost of their services would be with regard to the possible refinancing of the bonds.
“It is still to be determined,” Gebhardt said. Cornejo indicated that the fees to be charged would depend on which refinancing alternatives the authority chose to take.
“Will you negotiate on your fee?” Cohen asked and Cornejo indicated Davenport would be open to negotiations.
Another question Davenport officials could not answer for authority members at Monday morning’s meeting was whether or not the county was up-to-date on all required continuing disclosures as required by the bondholders.
Authority member Register quizzed Gebhardt on the disclosure issue and he responded, “I don’t recall, but we will certainly look into it.”
Register asked if not being in compliance on disclosures would negatively impact the county’s credit rating. According to the Davenport officials, being out of compliance would not directly impact the county’s credit rating, but they acknowledged it would have to be disclosed.
Complicating matters for the authority, which previously had not been involved in the decision to engage Davenport nor held any planning meetings with Davenport on a possible bond refinance, is the fact that in 2017 the authority and county commission engaged Raymond James, underwriters on the 2010 and 2015 bonds, to pursue a refinancing of the 2010 bonds.
Raymond James and its representatives, who have worked not only with the county, but also with the Grady County Board of Education and the City of Cairo in the past, began work on opportunities for refinancing the 2010 bonds during the latter part of 2017. This was the same time that the administration of former county administrator Carlos Tobar ended and new tax laws were passed in December 2017 which eliminated the possibility of refinancing the bonds until 2020.
Clifford (Bucky) Kimsey of Raymond James met with Grady County Commissioners last October and reviewed the letter of engagement, signed by then Lake Authority Chairman Lee Gainous and Grady County Commission Vice Chairman Ray Prince, and discussed some of the preliminary work that had been done to prepare for the refinance in 2017. He explained that for whatever reason, the county did not move to proceed with the refinance at that time and in the interim the tax laws changed delaying any possibility of refinancing the bonds until 2020.
Kimsey also outlined for the commission the county’s failure to comply with the continuing disclosures. The county, in the past, had paid an annual fee to Raymond James to insure compliance issues were addressed each year, but Tobar had convinced the county commission he could maintain compliance and would file the annual disclosures himself.
Authority Vice Chairman Chip Wells said Monday morning he did not know if there was any legal or monetary penalty for walking away from the 2017 engagement letter with Raymond James, “but in my heart it’s not good business to ignore the engagement.”
Wells asked Cornejo and Gebhardt for their thoughts on the issue. Gebhardt said there is no penalty and Cornejo said the engagement letter is not binding or a contract, however Gebhardt acknowledged the authority’s concern about good business practices.
Cornejo told the authority if it was their decision to proceed with the refinance with Raymond James, Davenport, as the county’s financial advisors would work with the firm on the refinancing of the bonds.
Authority member Register shared her experience having worked with Kimsey of Raymond James on previous public finance issuances as a member of the Grady County Board of Education and she suggested the authority schedule a meeting with Kimsey out of “fairness.”
Grady County administrator, J.C. (Buddy) Johnson III, requested to be recognized and he told the authority as a former investigator it was his opinion that the authority should asked representatives of Raymond James why they were opposed to working with a financial advisor, such as Davenport.
“The answer to me is obvious,” Johnson said.
Vice Chairman Wells apologized to Davenport officials and explained that he had only learned of the engagement letters late last week. Wells joined the authority in 2019 and no authority members were included in the meeting county commissioners had with Davenport or Raymond James in 2019.
“It’s an obligation of sorts and for me, as one person, I want to know what does that obligation mean,” Wells said.
Cornejo said that was a decision the authority must make, but he noted again, in his opinion, the engagement letters were non-binding and not a contract.
Authority member Cohen suggested the authority “hit the pause button” on Davenport’s recommendation to issue a Request for Proposals from local, regional and national banks on June 2.
“I’d like to talk to Raymond James and to (County Attorney) Gabe (Ridley),” Wells said. Authority member Bob Ponder asked if the authority had any obligation at all to Raymond James.
“We may not, but I’m focused on best business practices, and I want to know what it (the engagement letter) means first,” Wells responded.
Davenport officials presented the authority with a timetable that called for the authority to meet Monday and the next day authorize them to solicit an RFP from banks and for the responses to be received by June 25.
Based on Davenport’s recommendation, the authority would pursue a direct bank loan, which they predicted the rate on such a low would range from 1.25 percent to 1.75 percent.
Cornejo and Gebhardt told the authority an underwriter is not required in a direct bank loan and such a transaction could be closed more quickly and easier than a public market issuance.
With a 1.25 percent bank loan, Davenport projects the county would save $1,670,980 on its existing debt service. If rates are not what have been estimated, Davenport suggested they would then pursue a public issuance.
Register made a motion to table and her motion was seconded by Cohen. Chairman Childs requested Wells schedule a meeting with Raymond James as quickly as possible.
Grady County contracted with Davenport & Company last December and since that time officials say the consultants have been working on a “comprehensive financial review,” which they say is necessary as Davenport monitors “for the possible refunding” of bonds issued to finance the construction of the Tired Creek Lake dam.
In other business Monday, the authority:
Voted unanimously to recommend to the county commission that Register and Wells be reappointed to a full, three-year term on the authority. Both were appointed in 2019 to fill the unexpired terms of Edgar B. Smith III, and LaDon Toole, who resigned.
Heard a report from lake director, Mike Binion, that Mara Elkins had resigned as the authority’s secretary. Binion requested the authority take action on filling the vacancy.
Heard a request from Binion for guidance on whether or not to solicit proposals for engineering services and land planning for the proposed RV park at Tired Creek Lake. The county commission and members of the authority recently met with Charlie Johnson of Wood & Partners, who had done previous work for the authority on the lake project, to discuss the concept of an RV park near the Cedar Springs East boat ramp. County administrator Johnson suggested that an RFP be put on hold because he had been notified a University of Georgia student could be made available through the Archway Partnership to do the preliminary design at no cost to the county. No action was taken Monday.