County reviews bond options for jail
Bond counsel David Arteberry of George K. Baum & Co. reviewed options for issuing bonds for construction of a new jail Monday with Marion County Commission.
He said there are three main options, and that the main differences are in timing. All three have benefits and drawbacks.
Option 1 is to issue all bonds as soon as money is needed for the project. This option is the simplest, because there is only a single issuance — which leads to only having one issuance cost, as well, although that would be a relatively small portion of the project’s cost. It also would allow the county to lock in current interest rates, which are low.
However, Option 1 might lead to selling more bonds than are needed for the project. It would also result in having bonds issued before they’re needed. Both cases would result in the county paying more interest.
“It would sit there, and we would be paying interest on money we have no use for,” Commissioner Dan Holub said.
Option 2 is to issue temporary debt as soon as money is needed, and to issue the long-term bonds when the final project cost is more clear. Short-term interest rates are low — between 1 and 1.5 percent — right now, Arteberry said.
The drawbacks of Option 2 include the fact that interest rates could go up before bonds are issued, and that there would be two issuance costs — one for the temporary debt and one for the long-term bonds.
Option 3 is to sell some bonds as soon as money is needed, and the remainder when that amount runs out and the county knows the final cost of the project. That would allow the county to lock in current low interest rates on part of the bonds. It would also simplify selling bonds to local investors, which commissioners have said they wish to do.
The drawbacks of this option include issuing a portion of the bonds before they’re needed, resulting in paying more interest, and paying for two bond issues rather than one.
Arteberry said all three options are valid, but that he wouldn’t recommend Option 1.
The county could sell bonds to local investors with Options 1 and 2, but it would require some extra work, he said. Bond issues for new construction larger than $2 million require a competitive sale, unless they are grouped with a refinancing issue, as well. Arteberry said the county could refinance some of its debt at the same time as issuing the bonds, allowing bonds to be sold locally.
Holub and Commission Chairman Roger Fleming said it was important to them to offer bonds to local investors, because they promoted that as a possibility while meeting with the public about the jail issue. Holub said he preferred Option 2.
Architect Andy Pitts was unable to attend the meeting, because he was called for jury duty. He called the commission and scheduled a meeting Monday.
Sheriff Rob Craft and Commissioner Randy Dallke will also meet with Pitts as needed, and Dallke will bring any issues that require the full commission’s attention to its meetings.
If the state can prepare everything for the 0.5 percent sales tax to begin July 1, the county will receive the first sales tax payment in September.
The next commission meeting is Thursday.