Elbert County refinances debt to save money

North Carolina bank deal brings interest down sharply

Posted 3/5/16

The Elbert County Board of County Commissioners entered into an agreement to refinance more than $5.8 million of the county's debt on Feb. 29. The agreement was one of three interest-saving actions taken by the BOCC that is estimated to save …

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Elbert County refinances debt to save money

North Carolina bank deal brings interest down sharply

Posted

The Elbert County Board of County Commissioners entered into an agreement to refinance more than $5.8 million of the county's debt on Feb. 29. The agreement was one of three interest-saving actions taken by the BOCC that is estimated to save taxpayers more than $1.7 million over the next 15 years.

“We started a couple of years ago, where we had to look at our finances, restructure our finances … before we were eligible to refinance these loans,” said County Manager Ed Ehmann. “We're there today.”

The agreement with Branch Banking and Trust (BB&T), a Fortune 500 company headquartered in Winston-Salem, North Carolina, refinances $5.8 million of debt on the Elbert County Justice Center previously held by Wells Fargo.

Several factors prevented the county from refinancing the Wells Fargo note prior to this year. Under the original terms, the county was not allowed to refinance prior to 2015. Additionally, the county failed to maintain all of the note's terms, specifically a $500,000 reserve.

Over the past two years, improvements to the county's financial situation, its ability to meet the reserve requirement, and timely budget and audited financial statement filings allowed it to enter into negotiations to refinance.

In addition to reducing the interest rate on the bond from 5.25 percent to 2.61 percent, the agreement unencumbers several county assets such as $3.0 million in water rights, removes the $500,000 reserve requirement, eliminates a balloon payment, and releases the county from obtaining bank approval before spending $300,000 or more.

“We've also been able to roll that $2.6 million balloon payment into the refinance, so there's no obligation at the end of the term. It adds roughly two years to the refinance itself; however, it'll save over the period of the note around $1.7 million. We maintain roughly the same interest and principal payment over 15 years that we are currently making,” Ehmann said.

In two other actions, commissioners paid down debt on the Foxwood Estates and Foxwood Ranches Public Improvement District as well as for Meadow Station. Acting as the boards for the respective bodies, the members eliminated two years of debt from both districts, by paying down $50,000 and $95,000 of notes respectively.

The funds used to pay down the notes came from a Specific Ownership Tax (SOT) collected by the county as part of license plate registration and renewal.

“By statute, any entity in the county that has a mill levy gets a percentage of that SOT tax. Per year for Foxwood it's about $4,000,” said County Treasurer Rick Pettitt. “For Meadow Station, it's about $10,000 per year.”

Pettitt estimated the total interest savings to be $37,000 for Meadow Station and $34,000 for Foxwood Estates over the terms of the notes.

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