County leaders approved an $8.95 million bond sale today to build a new downtown jail that netted them an additional $1.7 million up-front payment because they agreed to pay a higher interest rate.
The Board of Supervisors had delayed the bond sale a week amid a turbulent municipal bond market that was jolted by manufacturing and job data announcements and a large foreign bond sale failure — and that delay served them well, said Nathan Summers, a public finance banker who is helping Carroll County with the bond sale.
“We saved some money by waiting and letting the market flush itself out,” he said. “We’re in a good spot.”
The nearly $9 million of borrowing that voters approved last year to pay for the new jail will not cover its full cost because early estimates of that cost were millions of dollars short. The bid for construction that the supervisors approved in September was about $4 million more than expected.
To help cover that funding gap, the supervisors will pay a premium interest rate of 5 percent to investors in exchange for more money up front. Weeks ago, Summers projected the county could net about $1.9 million in additional up-front money, but that number dwindled some after an uptick in interest rates made the 5-percent rate less enticing.
The current plan also requires the county to contribute about $323,500 in Local Option Sales Tax funding to close the funding gap for the $10.9 million construction bid from Badding Construction.
The county will repay the borrowed money over the course of about two decades. The borrowing plan allows for the county to refinance the debt after eight years, which could lower the interest rate. Summer initially had advised the supervisors to extend that number of years to 10 to encourage more attention from potential investors, which would have increased the amount of interest the county must pay, but current market conditions allowed the plan to remain at eight years.
The bond projections Summers provided the county today include a total interest payment of $5.18 million on top of the $10.9 million construction costs.
The supervisors also hope to modify the jail construction plans to bring down the construction cost and use about $500,000 of their reserve funds to help pay for the project. They are also considering selling county-owned farmland north of Carroll that they have estimated is worth about $1 million.
“Even though we saw construction costs go up higher than the engineer estimates, we fortunately had a case where interest rates went quite a bit lower than when we started, so those two factors ended up washing each other out,” Summers said. “We’re about right back to where we were talking about (initially) about impact for taxpayers.”
Summers projected Thursday that a county homeowner of a home valuated at $125,000 would pay about $31.28 a year related to this project.
Information from the county before the referendum passed had estimated that taxpayers with a residential property of $100,000 would pay about $25 more a year in taxes for the project.
“I’m very happy the interest rate has gone down,” Carroll County Supervisors Chairman Neil Bock said. “The cost to our taxpayers is similar to what it would have been if the construction prices had been accurate.”