The Washita County Public Facilities Authority board met Tuesday, Oct. 1, and formally accepted the agreement between the agency and Centennial Law Group, represented by Bodie Bachelor, as bond counsel for the upcoming refinance of the authority’s outstanding bond debt.
At the meeting, Bachelor and Greg Nieto of the Baker Group, who was previously contracted to serve as the board’s financial advisor, discussed with the board the possibility of refinancing the existing bonds through direct bank notes as opposed to the issuance of new bonds. Nieto presented a draft request for proposals (RFP) to the board, which he said he intends to send out to local and regional banks within the next one to two weeks. Both Nieto and Bachelor agreed that the authority should be able to secure bank financing for the approximately $6.3 million required to pay off the existing bonds, with closing and administrative services fees.
Nieto told the board members that despite the loss of the county’s credit rating, the market conditions are currently such that even a non-rated financing should provide a lower interest rate than the current bonds. The county’s previous A rating was based upon a very low debt service ratio - the amount of money collected in sales and use tax revenue as compared to the amount required to make bond payments. When sales tax revenue took a downturn, that ratio increased, eliminating the county’s rating.
The financing, Nieto said, would be based upon the previous sales tax amount and not upon the new 1.25 percent tax which went into effect Oct. 1, 2019. Doing so, he said, makes the financing more attractive for both banks and bond investors, should that be required. It could also allow the county to create a reserve fund for early payment of the debt, should tax revenues be high enough.
Bachelor said he was in the preliminary stages of investigating another program through the Oklahoma Development Finance Authority which may possibly allow the authority to borrow up to $5 million of the debt through a guaranteed program, which could provide even lower interest rates. He stressed that the authority may not qualify for the program, but he would investigate it in depth and report back.
The existing bonds are callable on any date after Dec. 1, 2019, and both Bachelor and Nieto agreed the financing could be closed on or close to that date, based upon current rates and circumstances.
Nieto said he hopes to have proposals in hand and a recommendation for financing ready for the board’s next regular meeting, which is scheduled for 9:00 a.m. Tuesday, Nov. 5, 2019, in the conference room on the second floor of the Washita County Courthouse.