County refinances two loans
By Steve Herring
Published in News on April 19, 2012 1:46 PM
A refinancing package approved Tuesday morning by Wayne County commissioners is expected to save the county $390,000 over the life of the new loan.
The county stills owes $1.39 million of the $3.77 million it borrowed in 2002 to renovate the Borden building -- a 15-year note at 4.33 percent interest.
In 2008, the county borrowed $9.7 million for a new radio system. The 10-year loan, of which $7.91 million remains, has an interest rate of 3.38 percent.
The public hearing held before the vote was taken is required by state law since the refinancing involves real property.
Consultant Ted Cole of Davenport & Co. was the only person who spoke during the brief public hearing.
"Keep in mind that on the refinancing we are not extending the debt; we are not changing the amortization -- we are matching the original maturities paying off the higher interest rate and locking into a lower interest rate," Cole said.
The loan would still be paid off in 2018, he said.
During the 8 a.m. agenda briefing session, Commissioner Ray Mayo had asked County Manager Lee Smith if commissioners had not earlier discussed the possibility of paying off the $1.39 million balance remaining on the Borden building project.
That had been a consideration earlier, but Davenport officials had recommended the refinancing as a better option, Smith said.
"Davenport came back and said, 'You have to look. We are cashing out the Mount Olive library project, the Services on Aging project and you just borrowed $15 million on schools.' They said, 'You are looking at engineering on the jail.' We don't know what that is going to cost. I know I have a roof issue and major renovations -- in my estimations $2 million to $3 million at a minimum.
"That being the case, they said, 'If you are going to have to reduce cash by that much we would not recommend that you not pay it off at this time.'"
Commissioner Jack Best said that the document was a "little bit" confusing to people not familiar with reading one and asked County Attorney Borden Parker to explain how the county came up with the savings.
"It is reducing the interest that is having to be paid on the money," Parker said. "BB&T had the lowest rate and the lowest closing charge which means a savings on that."
The county's request for proposal was submitted to 18 national, regional and local banks of which four responded -- BB&T, PNC (which recently acquired RBC Centura), Sovereign Bank and SunTrust Bank. However, Sovereign's proposal did not include the Borden building.
Commissioner Steve Keen asked Cole if Sovereign had been aware of the Borden building loan.
It was, and all of the banks received the same information, Cole said. Sovereign normally made loans for equipment and was not interested in refinancing loans for real estate, he said.
Sovereign's proposed interest rate of 1.59 percent was the lowest. It also required $2,500 in closing costs.
PNC was the next lowest at 1.62 percent, but would charge $7,500 in closing fees. PNC would allow the county to pay the loan off early subject to a "make whole" call provision that would allow the bank to recoup lost interest and effectively eliminate any savings, Cole said.
BB&T's rate was 1.63 percent with $1,900 in closing costs. SunTrust's rate was 1.75 percent.
The motion to accept the BB&T proposal was unanimously approved.