Cumberland Times-News

November 28, 2012

Refinancing debt could save county more than $1 million

Commissioners planning to introduce code home rule bills

From Staff Reports
Cumberland Times-News

— CUMBERLAND  — Allegany County could save as much as $1.2 million by refinancing some of its debt, Jason Bennett, the county’s finance director, said Wednesday.

Allegany County commissioners plan to introduce code home rule bills to issue the bonds for sale at today’s Allegany County Commission meeting.

The meeting will be held at 5 p.m. at the county office building at 701 Kelly Road.

The exact amount of the savings is dependent upon interest rates when the bonds are actually put on sale, Bennett said. “We are anticipating going to sale in March — but this is still tentative,” Bennett said.

A late-October work session included a presentation by Bennett and the county’s bond counsel, outlining some of the potential savings and the process for putting the bonds on the market.

“The opportunity to refinance is a substantial one,” said Sam Ketterman, senior vice president at Davenport & Co., at the October meeting. While the financial issues are complex, the idea is simple. The county will issue new bonds at lower interest rates than the higher-rate bonds previously issued. The county pays less interest on the debt, creating savings and taking a bit of pressure off the county budget.

The move could save $385,000 in 2013 alone. Of course, interest rates fluctuate, so the window of opportunity may be small. The present value savings equal 10.5 percent, and “that’s a huge number,” Ketterman said, with many clients going forward at a 2 percent present value savings. Present value savings is a required calculation for this type of transaction, Ketterman said.

The county has not gone to the public bond market since the early 2000s, Ketterman said. County officials will need to make a credit presentation to the major bond rating companies.

“Sales are now done by the Internet. The results are better than the old era,” Ketterman said.

Also on the agenda for today’s meeting is an amendment to the county’s Capital Improvement Plan to add $1 million for the Allegany High School replacement project.

Demolition costs for the 500,000 square feet of buildings at the former Braddock Hospital site are estimated at about $2 million, and Commission President Michael McKay said if the demolition costs exceed $2 million, the board of education “would be responsible for the difference.”

The demolition work is expected to start next summer.

McKay said an additional $1 million would bring the local contribution toward the pro-ject from both county commissioners and the board of education to $12.2 million.

The current Allegany High School was built in 1925. The board of education decided to build a new high school after spending more than two years studying how best to reconfigure its secondary schools.

Preliminary estimates show that the county would pay a total of about $13 million toward the estimated $34 million project.

McKay has said the county expects to realize some savings through refinancing and would consider directing some of that toward demolition.