Bond interest rates have varied over the past ten years from a low of 1.290% to a high of 4.860%. The higher the interest rate, the more money that county must pay on the bond. The current interest rate is 2.680%.
How much debt does NorCo have right now?
The county owes $137,153,789, including principal and interest, on four general obligation bonds and lease rental debt.
McClure plans to use bond money to exercise an option to purchase the Human Services Building next year for $14,468,731. He also wants to build a $11 million forensic center at a site to be determined. Though the County has funds on hand to purchase the Human Services Building next year, McClure would prefer to borrow the money. The reason is that the County gets $800,000 from the state every year to pay for the lease. If the County buys the building, it will lose that money. But if it borrows, it will continue to receive this funding. So McClure plans to leverage that state money to pay debt service on a bond and use the savings on hand to pay for the P3 project.
Where's the forensic center going?
This is a stumbling block for Peg Ferraro and John Cusick. "Before I take out a mortgage, I want to know where I'm going to build a house," complained Cusick.
McClure said they will all know exactly where before voting on the final ordinance, or at least have a very good idea. He said that three locations are under consideration, and not a dime needs to be spent to purchase them. In other words term , it will be located on land already owned by the county. He declined to be more specific because "negotiations are going on as we speak."
How much will the County pay for a $26 million bond?
There are two ways to repay the money. The first is through a 20-year term at a fixed rate. The second is still traditional, but is a wrap around and for 11 years only. This will make the county debt free by year 2030. A wraparound will mean that the debt service is higher on this bond, but not until 2024.
As with any bond issue, there will be costs for bond counsel ($24,000), financial advisor ($32,500), rating fee ($25,000),etc.. The biggest expense is the underwriter, and is projected at $208,000.
Oct. 18 - Borrowing Ordinance introduced.
Nov. 1 - Borrowing Ordinance considered.
Late Nov.- Preliminary Finance Documents
Early Dec. - Seek proposals for Underwriter
Jan. 14 - receive credit rating (County is currently very high, at AA and AA1)
Jan. - Underwriter engaged
Jan. - lock-in interest rate
Feb.- close on Bond