The Washita County Public Facilities Authority board met in open session Tuesday, Sept. 17, 2019, and voted to hire an attorney to serve as bond counsel for an effort to refinance the 10-year-old bonds issued for the construction of the Washita County Justice Center.
The board voted to accept the contract offered by Jacob A. “Bodie” Bachelor of the Centennial Law Group. Centennial presented their proposed contract to the board earlier this year, offering to provide bond counsel professional services for 0.8 percent of the principal amount of the new bank note or bonds issued.
The board had previously received a proposal from J. Brent Clark, the attorney who served as bond counsel on the original jail finance. Clark initially had offered to perform the services for one percent of the new principal amount. In a later meeting, Clark offered to discount his services to 0.75 percent, then offered to serve with Centennial as co-counsel and receive 0.5 percent with Centennial earning 0.25 percent. Centennial declined the offer.
Prior to the meeting, Clark sent another proposal to the board, offering to prepare a request for proposal to area banks for the refinancing of the jail and serve as both bond counsel and financial advisor for a flat fee of $60,000. The letter was received by the Washita County Clerk’s office on Monday, Sept. 16, which was too late to be added to the meeting’s formal agenda. Oklahoma law requires regular public meeting agendas to be posted a minimum of 48 hours in advance.
Acceptance of Clark’s proposal could have created additional confusion, as the board had previously contracted with Greg Nieto of The Baker Group to serve as financial advisor. Under the terms of Nieto’s contract, The Baker Group is to receive one percent of any debt incurred by the Public Facilities Authority.
The stated purpose of the refinance, either through bank loan or the refunding of the existing bonds, is to reduce the county’s monthly debt service on the Washita County Justice Center. As of Friday, Sept. 20, 2019, the outstanding principal on the original Series 2009 bonds was $7,030,000, which creates a monthly debt service obligation of $74,147.04. The original bonds have a varying interest rate, currently at 3.7 percent. That rate increases to 3.9 percent effective Dec. 1, 2019, and incrementally each year thereafter until Dec. 1, 2025, when it caps out at five percent.
The Public Facilities Authority also has a reserve fund balance of $905,250, which would be used to pay down the principal amount of any new debt. Including the fees for the financial advisor, bond counsel, and bond underwriter (if needed), the refinanced principal amount would be approximately $6.3 million. The board is looking for a 10-year finance, which would pay off the debt at the same time as the initial bond issue.
If the board were able to secure a refinance at three percent, the monthly debt service would fall to $60,833.27, creating a monthly savings of nearly $14,000. A 2.5 percent rate would result in a required payment of $59,390.04, a savings of more than $15,000 per month.
The 2009 bond issue included a stipulation that the bonds could not be refinanced for at least 10 years. That time limitation expires Dec. 1, 2019.