Union County is moving forward with a plan to pay off one bond and reversing course on a plan to pay off another.
Last week, county officials met with bond counselor Andy Brossart, of Bradley Payne. Brossart encouraged the commissioners to pay off the 2009 bond, which had been used for various purposes. The original bond was for $6.47-million with a 4.5% interest rate, payable over 15 years and eligible for early payoff in 2018. Commissioner Chris Schmenk said the commissioners considered paying it early several years ago, but ultimately decided against it.
Brossart said there is $990,000 remaining on the principal of the bond. He said that by paying the bond early, the county could save about $91,000.
The commissioners unanimously approved the move.
They also approved a resolution to transfer more than $430,000 to repay a 2012 sales tax bond. The bond has $420,000 remaining on the principal with a 2.5% interest rate. Brossart said that because the bond is not callable and expires at the end of next year, the county would still need to pay the interest on the bond. He said the county would not be paying the bond off, but rather giving the money for the principal as well as the interest to a trustee to make the regular payments.
Brossart said he is, “having these conversations with a lot of clients.”
Thursday afternoon, the Journal-Tribune contacted Schmenk to discuss the decision to pay off the 2012 bond. At the time she said that by giving the money to the trustee, it would create financial flexibility for the county. She said there was no project on the horizon that would require additional ability to borrow. When asked for more reasoning behind the decision, Schmenk said would look into the matter further.
Tuesday, the commissioners met with County Treasurer Andrew Smarra and County Auditor Andrea Weaver.
Schmenk told the pair, as well as the other commissioners that, “some questions have come up about whether that was the best use of county funds.”
She said that in thinking more about it, she “wanted to more fully understand it.”
Smarra said the decision to pay off the larger bond early was “a smart move.”
He said giving the money to another group to pay the 2012 bond is “not a good financial move.”
“From a strictly financial sense, that doesn’t make sense,” Smarra said.
He said the move doesn’t save the county any money, in fact it would cost the county. Smarra said the money would earn almost no interest with the trustee. With the money sitting in a county bank account, the money would make about 0.25% interest, generating about $12,000 over the remainder of the bond’s life.
Weaver said it was not her job to advise the county on how to handle money, but said she agrees with what Smarra’s statements and recommendation.
Schmenk asked if paying the bond off would help the county secure a batter rate on future borrowing. Smarra said that while the money would be moved out of the county account, the bond still wouldn’t be paid off until December 2022 so the debt would still count against the county debt limit.
County Administrator Tim Hansley said the idea of paying out the money ahead, was, “the philosophy of the previous board.”
Hansley said he had a conversation with Brossard in December, but said there was perhaps a misunderstanding about the county priorities.
After a long discussion on how the group could reverse the decision, it was agreed the commissioners would rescind the resolution to pay the smaller bond.
“I think that’s a good decision,” Schmnek said.