Supervisors agree to bond for Ferrum College

Published 2:17 pm Thursday, July 28, 2016

The Prince Edward County Board of Supervisors has agreed to allow the county’s industrial development authority’s (IDA) to assist in issuing a $9.9 million bank qualified bond for Ferrum College.

At a recent meeting, County Administrator Wade Bartlett told supervisors that language in the Code of Virginia stipulated that with the bonds, there was no legal responsibility on the county’s behalf for the debt, meaning there was no risk or obligation for either the IDA or supervisors.

According to Bartlett, the college’s host county, Franklin, and neighboring Floyd County usually assist the college with bonds, but are unable to this year because of their own bond requirements.

Bartlett said in the past, Prince Edward has allowed its bank-qualified bonds to be used by other entities.

Bank-qualified loans are used to provide a lower interest rate to the borrower, he said.

According to county documents, “Most recently, Prince Edward County allowed Hampden-Sydney (College) to use the allotment to build their library. The IDA charges Hampden-Sydney $1,000 each year for the administration of the bond. The IDA does not receive any notices of payment nor have any other bond management activities except for an annual bond affidavit. The IDA is permitted to charge Ferrum an annual fee of up to one-eighth of one percent of the outstanding principal balance of the bond ($12,375 for $9.9 million).”

According to county documents, 501(c)(3) organizations “are required to issue bonds through a governmental entity in order to borrow in a tax-exempt basis. This is a common practice in Virginia. Typically, that is accomplished through an IDA, like the one in Prince Edward County.”