Did Gilmer County Lose in Refinance Deal?

Gilmer County Board of Commissioners voted last Thursday to refinance $5.2 million of the county’s general obligation bonds. Merchant Capital Vice President Andrew Tritt says based on Thursday’s market prices the deal could yield a savings for the county of $394,000. Merchant Capital has already saved Fannin County almost $700,000 on the refinancing of its courthouse and is currently working with Pickens County to refinance some of its debt.

An earlier refinance deal in March of this year, though, could have saved Gilmer between 1.4 and $1.7 million. According to Post One Commissioner Randy Bell, the March deal would have refinanced all of the 2005 A Bond, which financed Phase I of the Courthouse. Bell says the county then borrowed a $4.7 million Tax Anticipated Note (TAN), tax free, reducing the amount of refinancing. TANs must be paid back in full by year end. The county waited and didn’t move on the deal.

In the county’s wavering, interest rates spiked, sweeping the savings away.

“Since we last met, interest rates have gone up,”

Tritt said during last Thursday’s commissioners’ workshop.

“To that point, the original structure that was contemplated, which was a $15 million non-bank qualified transaction, no longer has savings associated with it.”

As such, during the commissioners’ workshop Thursday afternoon a crowd of citizens vocally urged the commissioners to accept the current deal as soon as possible before the rates change again and the county loses another opportunity to save money.

Commission Chair J.C. Sanford was reluctant to refinance, taking any deal even one for a lesser amount. Tritt, who has worked with the county for months now, explained that, like last time, interest rates could further increase, reminding Sanford all projections are subject to change on market conditions.

“I don’t think it’s safe to think that you’re always going to have savings,”

Tritt warned.

“It’s an ebb and flow. I don’t think that the county can be reactive anymore. I think to get a deal done—if that’s what ya’ll want to do—you have to be proactive and get to a point where you can get into the market, (where) you can refund the bonds, as it makes sense.”

In the workshop, Sanford was concerned with the cost to process the deal to the county. Tritt explained there would be no cost to the county until a deal closes.

“I guarantee we won’t charge you more than you’ve ever been charged before,”

Tritt said. Based on current numbers and environment, Tritt said if a deal closes now it will cost the county $120,000 on a $5.2 million refinance deal, which could save the county $394,000. He also said the estimated $394,000 is after the $120,000 fee is deducted.

“There’s a lot of factors involved,”

Sanford said.

“And I really think that we need to look and listen to them.”

Sanford’s reluctance, though, was met by citizen pressure to take the deal.

Citizen Charlie Paris pressed the county to seize the day.

“As a taxpayer of this county,”

he said,

“I want it now…I don’t want to wait till a special meeting; I don’t want to wait to see what it’s going to be…Waiting is what’s killing us. And we need to do something.”

In her comments, Citizen Rebecca Landau also had a carpe diem message for Sanford and the county. Landau, who said she’s made her living her whole life in the finance and mortgage industry, urged the county to act now.

“There is no way interest rates are going down,”

she said,

“…I say this as a professional in the industry: there’s really no point in waiting. It’s not going to cost us anything to do it; it is costing us something to wait.”

Paris also said he had a problem with the idea that the county didn’t lose $1.4 million, referring to an earlier comment made in the workshop. The comment brings up the heart of matter: is the latest refinancing deal truly a savings of $394,000? Or did the county lose slightly over a million dollars by waiting?

During the regular meeting last Thursday night, the board approved moving forward with the deal. Commissioners Randy Bell and Danny Hall voted for the bond refinancing; Chairman Sanford voted against.

Although the deal says the county could save approximately $394,000 and seems like a victory, to citizens experiencing the county’s financial woes, it may only seem pyrrhic at best.