Pickens Looks to Refinance Water Debt

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The Pickens County Board of Commissioners heard two proposals this week for refinancing the county’s $ 8.6 million water and sewer debt. The debt is a combination of USDA (Unites States Department of Agriculture) and GEFA (Georgia Environmental Finance Authority) loans. Kidwell and Company Director Tony King delivered his presentation first during Wednesday’s BOC workshop.

King described his organization as a group of municipal advisors and could offer two options to refinance the county’s debt, saying all of the county’s debt is capable of being refinanced with the exception of the short, 2001 GEFA loan, which he said will be paid off next fiscal year. He also said he doesn’t think the other three GEFA loans with 3 percent interest rates could be refinanced.

“What we are proposing is an issue of tax-exempt municipal bonds to refinance these obligations that would extend over 30 years,”

he said.

Option one, he explained, has the lower interest rate.

“This issue would have a lower interest rate than the second option,”

he said.

“Because the debt service is higher in this first year…the debt revenue coverage is slightly lower.”

He added that option one also has the capacity for debt later over the life of the refinancing.

“If you believe the water system will incur debt in future years. And there (are) big projects you think you’ll be taking on in the next five to ten years, this option maybe a better fit, because it leaves more capacity in later years for adding debt.”

In option two, King said the county saves more money early in the refinancing period, saying that this option improves cash flow and liquidity. Previously, he said, he has saved clients five to 10 times his fee. He explained that his company creates competition among underwriters, driving interest rates lower.

“And it could save this community hundreds of thousands of dollars in the process, if not millions of dollars,”

he said.

Merchant Capital Senior Vice President Phillip Fletcher III and Vice President Andrew Tritt also presented to the board. In addition to discussing refinancing plans for the water debt, Fletcher and Tritt discussed a possible plan to bond the next round of special option sales tax (SPLOST).
Flaunting credentials, Fletcher said his organization has completed 206 transactions in water and sewer deals totaling $4.7 billion, adding that since 2000 Merchant has processed $2.4 billion worth of SPLOST sales transactions.

Explaining the intricacies of the water and sewer plan, Tritt said the county can purchase $1.3 million in general obligation bonds to pay off some of its water loans, and, when the dust settles the county could save $112,000.

“You accomplish your goal and objective without going through a bunch of hoopla,”

he said.

For his part, Fletcher started to discuss bonding the next round of SPLOST, but Commission Chair Robert Jones recommended he come back at a later date, when the board has more details on projections for projects expected to be on the SPLOST referendum. Fletcher, however, commented on the bond market, saying long term bond have greatly increase due to the Fed cutting back on purchasing, while short term bonds remain stable for the time being.

Jones said the board hasn’t decided if it will bond the next SPLOST, but if it does, it will be placed as part of the SPLOST referendum. The chairman also said the board has yet to discuss how much the county seeks to save with the refinancing of its current debt.

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