Thursday, October 18, 2018

McClure's $26 Million Bond

Lamont McClure
Scott Shearer, Managing Director at PFM, gave an excellent presentation yesterday to County Council about Northampton County's debt and Executive Lamont McClure's plans to borrow money through a bond issue.

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.

Timeline:

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

9 comments:

Anonymous said...

Bernie, is it true that Zirinski blew off the council meeting to go to A political festival for Wild in Allentown?

Anonymous said...

If she did, she should resign and run in LEhigh COINTY

Anonymous said...

Its easy to borrow money, then pass the tab to be paid to some later administration and taxpayers, why not use some existing buildings owned by the county. Bonds are not free money. It is time for all governments, local, school, state, county, and of course the federal government to curb spending and balance budgets.

Anonymous said...

The country hid the prison location. Now they're hiding the Forensics Center location. Yeah. Yeah. Yeah. Because ... negotiations. SSDD.

Bernie O'Hare said...

4:26 Zrinski definitely blew off the meeting. Hopefully, she had a good reason. I will look into this.

Bernie O'Hare said...

6:15, no, Brown actually lied about his intentions. McClure is being honest. It is going to be at one of three locations on county-owned land. Once he knows for sure which site works best, he will reveal the location.

Anonymous said...

How did Northampton County get so far in debt? History repeats itself. Learn from the past. Where are the three parcels you reference as County owned land. We are mortgaging our children's future. Gracedale is the most obvious choice for most of these projects. We gave Nazareth a noisy helicopter pad, let's give them some more pain in the ass projects. They're surrounded by corn fields and only the field mice would be affected. Field mice don't vote.

Anonymous said...

Why would the county be negotiating for land it already owns? That doesn't make sense.

Bernie O'Hare said...

Just because it owns the land does not mean it can do whatever it wants with it.