It’s official now.
Henderson County residents have gone another $8.5 million in debt.
The underwriters for this note? Piper Jaffray, a Kansas City, Mo. firm, which expected to sell the general obligation bonds approved by residents of this county late last year, to investors by the end of this week.
The bonds are for the expansion of the county jail.
Piper Jaffray submitted the best TIC (True Interest Cost), which the commissioners court unanimously approved Monday. Piper Jaffray won out over 13 other bids acquired by Southwest Securities of Dallas.
Senior Vice President for Southwest Securities, Raymond E. Newman, explained it all for the commissioners Monday afternoon.
The winning bid means the county gets the money from Piper Jaffray for a TIC repayment rate of 3.662685 percent.
“I can’t believe they got an interest rate that low,” said the county’s architect for the project, Kenny Byrnes. “That’s the lowest rate I’ve ever heard of.”
“I’m extremely pleased with that interest rate,” said Pct. 2 County Commissioner Wade McKinney.
The money will be used by the county, along with $3.5 million that was already in the county kitty, to almost double the current size of the jail facility for the $12 million it now has in place.
“This is a moment I know I’m going to remember for a long time,” said County Judge David Holstein at Monday’s regularly-scheduled meeting of the commissioners court, just before the signing of financial papers began.
What all of this basically means to the owner of a $100,000 home in the county is approximately $30 more per year in property taxes.
Of course, the final building cost won’t be determined until some time in May. The county has chosen to go with the “Contractor at Risk” program, in which the builder guarantees a locked-in cost for the jail construction.
The commissioners court voted in January to hire Templeton Construction of San Angelo for the project, after its bid proved superior to seven other bidders’.
The project is expected to begin by about June 1. Because of the Contractor at Risk form of building, the contractor will have to secure locked-in bids from a series of sub-contractors. Only then will Templeton Construction be able to come back to the county with its final, turn key, locked-in price. But that will occur before the June 1 startup date.
County officials hope that total will be close to the $12 million mark they’ve been shooting for, if not below.
Start up time for the new facility is expected to begin about June 1, with a completion date set for January 2008.
Southwest Securities constructed the payback formula with two older bonds in mind. The county will retire one of those bonds in 2009 and the other in 2010.
Until then, the county will pay a lower debt-service amount on the new bonds during the first few years.
Once the two old bonds are retired in 2010, the annual payment on the new bonds will rise significantly. Annual payments will then run between $12.2 million and 12.3 million annually until 2016 when the new facility is scheduled to be paid off.
Piper Jaffray will issue the county $8,541,954, plus accrued interest from the date of issue to the date of delivery. That money is to be placed in a separate account from other county monies upon delivery.
The bonds will bear interest rates that vary slightly from year to year. The idea was to get rates that vary little between the years, regardless of what may, or may not, happen with the stock market.
If rates go up, the county is protected. If they go down, Piper Jaffray is protected because the county won’t be able to go for a lower rate than what was just established at Monday’s signing.
For instance, the 3.6250 the county will be paying the first two years is the lowest rate it will see during the 10-year duration of the note.
On the other hand, the highest rates will reach a ceiling of 4.0 percent in the years 2013 and 2014.
The rate drops back to 3.550 in 2015 before a final interest rate in 2016 of 3.600.
The county will also be out $23,500 in insurance premiums for the bonds.
The county’s total cost for the current $8.5 million in financing comes to $10,688,653.
In other words, the county is buying the money over the next decade for $2,188,653.
The first payment on the new bond is set for May 1, 2007, and will be for $572,824.
The second year’s payment is $567,313.
The total rises to $808,070 in 2009 and tops the million mark for the first time in 2010 with a payment of $1,034.132 as the second older bond is retired.
After 2010, the annual payments are as follows:
•2011 — $1,281,007;
•2012 — $1,287,500;
•2013 — $1,287,445;
•2014 — $1,278,045;
•2015 — $1,277,245;
•2016 — $1,295,000.
The county is currently paying about $1 million annually to house inmates in out-of-county facilities.
Without that cost, the county ideally could expand the jail for little more than what it will save keeping those inmates at home once the facility is completed.
But much of those savings will be eaten up by increased costs for food, guards, and utility increases due to almost twice as many square feet for heating and cooling.
Still, those “savings,” whatever they are, will continue until the expansion is completed.
There is, however, another factor that should significantly lower inmate costs — even during the construction process.
The State Jails Standards Board in Austin, in recognition of the county’s building efforts, relaxed its rules for the Henderson County facility recently, enabling the county to move 24 of its “road” inmates back to the local facility once it agreed to make minor changes to accommodate them.
That alone is expected to save the county about $400,000 annually. If the current levels continue through construction, the county may be able to get by with about $600,000 in annual costs for housing out-of-county inmates until the new facility is completed in January of 2008.
It’s official now.