CUMBERLAND – During a joint meeting between the Cumberland Board of Supervisors and School Board on July 26 a public hearing was held on the refinancing of the 2008 VML/VACo bonds namely for the Middle/High School Complex.
Afterwards, the drafted lease financing agreement for the costs and terms associated with the repayment of 2008 obligations was presented and the School Board and Supervisors each adopted resolutions agreeing to the terms that were presented.
According to Vivian Giles, Cumberland County's Administrator and County Attorney, the Board of Supervisors voted unanimously for the school refinancing (2012 Lease Financing) and the School Board's vote passed with four votes in favor and one against. School Board member George Lee Dowdy III voted in opposition.
There were no speakers during the public hearing.
According to Chip Jones, Cumberland County Public Schools' Assistant Superintendent of Finance and Operations, after the meeting, the School Board was needed as part of the County's refinancing because of the lease being made against the school's facilities.
In July, James E. Sanderson Jr., senior vice president for Davenport & Company LLC, advised the members of the School Board about the possible refinancing option and how the process would involve them.
According to Sanderson during that meeting, the Cumberland School Board would be called upon to assist in the refinancing of the 2008 bonds, which were originally secured through the VML/VACo Finance program.
In 2008, the County issued debt to build the Middle/High School Complex and part of that included a “ground lease” by the School Board to the Industrial Development Authority (IDA), according to Sanderson's previous comments.
“That lease is what the lenders looked to for collateral to the County to pay the debt,” advised Sanderson to the School Board at that time. “When the Board of Supervisors considers refinancing this we, again, anticipate that same type of structure.”
Sanderson noted that the School Board would be asked at some time in the future to enter into a “ground lease” or a lease of the school facility with the IDA.
“And, again, that ground lease will be used as collateral to a potential lender,” noted Sanderson earlier.
“The liability to the School Board is zero,” he said in July. “You are not responsible for the debt…”
Currently, the loan has approximately $18,385,000 in outstanding principal with an interest rate of 4.76 percent that is subject to change weekly. Sanderson presented this information in July to the Board after the bids were received.
The terms of the 2012 refinancing package are, according to information presented by Sanderson, with SunTrust for a 17-year amortization refinancing/12-year fixed rate.
The interest rate is set to be 2.96 percent.
According to the information provided, SunTrust would be allowed to re-negotiate an additional fixed-rate period with the County after the 12 years and at that time the County could refinance the loan for the remaining five years at “prevailing interest rates.”
When asked about the principal amount in the draft lease financing, Ms. Giles provided, “It provides for $21.5…it shall not exceed $21.5 million.”
According to information provided to The Herald from Ms. Giles, the public hearing also included the refinancing of the County's 2001 public facility lease revenue bonds.
After the hearing, the Supervisors were also presented with the draft details of the lease financing of the prepayment of 2001 obligations. The 2001 bonds were mostly for the renovations and additions to the existing courthouse building and the County's administrative facilities.
The Supervisors unanimously adopted the resolution agreeing to the terms of the draft lease agreement, according to Ms. Giles. The School Board's assistance was not needed for this refinancing.
“The 2001 one is being refinanced as well,” offered Ms. Giles after the meeting.
Sanderson also provided information related to this refinancing in July.
At that time, he noted how the refinancing of the 2001 bonds would create a cost-savings for the County and one of his earlier presentations reflected approximately $340,000 worth of debt service savings.
According to Ms. Giles, the interest rate for the 2001 refinancing would be 2.31 percent and the principal terms are up to $2.35 million as stated in the resolution.
Related to final details of the refinancing arrangements, Ms. Giles reminded that the County has not gone to closing yet and that a few minor details could change but SunTrust is locked in on the interest rates but anything substantial would have to be brought back to the public.
“We haven't gone to closing,” she said. “…We are aiming for approximately August 15.”
Concerning annual payments or a schedule for the County's two refinancing programs, Ms. Giles noted, “Nobody can calculate that yet because you don't know exactly to the penny what your closing costs are going to be and there's no way to know that until you go to closing.”