One year after Sampson County staff proposed refunding long-term USDA loans over a shorter period of time as a way to save money, finance officer David Clack delivered the good news to commissioners.
Clack said the process started with a Local Government Commission meeting in September 2016, where county staff pitched the refunding of current bonds with a repayment period of 30 years, cutting three years off the total repayment period. The USDA loans previously had repayment periods that go through fiscal year 2050‐51.
“This was somewhat unusual and it took several months for the Local Government Commission staff to agree to accept our application,” Clack stated.
However, after the LGC’s approval, a meeting last month with the state treasurer and the sale of the bonds themselves — and many steps in between — the county’s refunding attempt was successful. Savings of around $300,000 a year will be realized starting next fiscal year, 2018-19.
“With this refunding, we shorten our repayment period by three years and save a total of $11,482,149,” Clack said.
In fiscal year 2018‐19, the county was set to spend $4,070,198 to pay debt service on Clinton, Union and Midway high schools, Roseboro Elementary School, the courthouse, Law Enforcement Center and the Sampson County Animal Shelter, as well as Public Works offices and warehouse and offices for human services, Administration, Finance and Economic Development.
That debt service will drop to about $3,759,887 a year — a reduction of $310,311. The total debt service has been reduced from $119,434,861 to $107,952,712, with the new repayment period to end in fiscal year 2047‐48.
After the LGC gave its OK, county commissioners in February 2017 authorized staff to file an application with the LGC and take other actions necessary to complete the refunding of the USDA loans. In May, county officials met with the deputy treasurer who expresed his reluctance to recommend such a long repayment period on a general government debt refunding. He told county staff that he would allow a presentation to be given in August.
At that meeting, county officials — Clack, county manager Ed Causey, chairman Clark Wooten and the county’s financial advisory — stated their case to refund the USDA loans in front of the state treasurer. Wooten emphasized that the reduction in debt service payments would equate to roughly half a cent on the tax rate.
The LGC approved ultimately approved the county’s debt structure and the county was allowed to begin the process toward selling bonds to pay the USDA loans in full. That included obtaining bond ratings. A positive rating means insurance — Clack said cost could have been upwards of $750,000 to ensure payment of the bonds — would not be needed.
Those calls with rating agencies covered such subjects as economic development, budgeting methods, current debt outstanding, revaluation, tax base and population growth and local obligations related to post-employment health benefits. The county received an “A” rating from Standard and Poor’s and an “A1” rating from Moody’s, the same received during a refunding in 2015.
The sale date was set for Aug. 30.
“We monitored the sale as it was happening and I am happy to report that we had great success,” said Clack.
The intention was initially to sell roughly $64 million in bonds, however demand was so great that there were orders for $257.7 million in Sampson bonds with just one year of bonds not being completely ordered. The county ended up issuing only the $64 million in bonds, generating the total savings of $11,482,149 over the remaining life of the USDA debt.
Clack thanked the Board of Commissioners, department heads and others, especially the underwriter, bond attorney and financial advisors, who guided the county through the process. Clack specifically expressed his thanks to Doug Carter of DEC Associates, who has worked on all of Sampson’s debt issues since 1994.
Commissioners lauded Clack and county staff for their diligence. The finance officer reciprocated, saying commissioners helped set the wheels in motion, allowing a positive move for the county to take place.
“Their attention to the needs of the citizens, funding partners, infrastructure and employees has created an ideal environment that allowed us to maintain our bond rating and save a great deal of money with this refunding,” Clack attested. “I would also like to thank them for the trust they have shown in staff over the several months that it took to finalize this refunding. This is a team that Sampson County has worked with many times over the years with great success.”
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