Last week the Marshall County Commissioners heard from their financial consultant Heidi Amspaugh from Baker Tilly. She told the commissioners of an opportunity to refinance the Jail Bond with substantial savings. This information comes at the same time the County has asked to have the state Legislature consider a change to the Special LIT (Local Income Tax) that is currently paying the bond payments for the jail. The request is to have the Special LIT changed to continue on after the jail bond is paid off. The funds would be used for the operation of the jail and continue without an end date.
Amspaugh presented a Refunding Analysis with three scenarios for refinancing the jail bond. She told the commissioner the initial bond was issued in 2006 and a refinancing was completed in 2014. She said there is a little over $5 million outstanding on the jail bond and a maturity date of February 2027.
Amspaugh said there is an opportunity to reduce the interest rates the county is currently paying on the 2014 bond issue and relieving the Debt Service Reserve that is currently in place for the bond issue.
The refunding in option one would allow the county to save $266,000 annually until the bond matures in 2027. In option two the savings would be $260,000 annually and in option three the savings would be $255,500 annually. The savings amounts are net of any cost of issuance. Amspaugh said, “We monitor all of our clients bond issues often to see if it makes sense for them to be refunded.” Amspaugh said all bonds have a call date and the call date for the jail bond is August 1, 2022. That is the time in which you can refund the bond issue or pay it off. That means they need to have things in place by May to make the change.
The interest rate would be fixed and Amspaugh said releasing the Debt Service Reserve of $1,113,000. The Debt Service Reserve would normally be used to pay your last payment on the bond issue when it would come due. There is an opportunity to release it because the revenues coming in are more than sufficient to cover the annual debt service payment and the bond has a property tax back-up on it.
Commissioner Kevin Overmyer asked Commissioner Stan Klotz if he had talked to Senator Mishler or Representative Jordan about the resolution to keep the quarter-of-a-percent to operate the jail? Klotz said his understanding was that it would be an amendment, but he was unsure where it was at. He said he didn’t think it would be a special standalone legislation because the deadline has passed on that. Commissioner Klotz said, “We cannot do without that rate.”
Amspaugh said, “This is just a refunding, lowering the payment as much as you can. It relieves you to be able to pay for other things.”
Commissioner Overmyer said the county is using about $2 million of the Special LIT funds now for jail operations. Overmyer said we can’t afford to pay off the bonds early and Klotz said not without legislation. Klotz then asked if they got the legislation if it would make more sense to pay it off rather than incur more expense by refunding the bond? While Amspaugh was not aware of the legislation the county is trying to get passed she was willing to talk with the commissioners if it got approved.
The commissioners, Kevin Overmyer and Mike Burrough voted to move forward with scenario one which would save the county $266,000 annually. Commissioners Klotz said, “I can’t do that today because if we get this resolution through, I think it’s the right way to go, but if not, this makes sense, but I just can’t do it today.”
Commissioner Overmyer said we need to look at refunding the jail bond saving the county $266,000 annually.
Overmyer suggested speaking to the County Council about the refunding but said there wasn’t enough time. She will be at the Council’s March meeting.