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Board of Commissioners
<br />Page 2 of 3
<br />May 12, 2020
<br />expenditure of fund balance is in accordance with the County's Fund Balance and Reserve policy.
<br />Staff has considered the opportunity cost of this decision as well. Interest earnings on any funds used,
<br />to pay down the debt would be lost. However, the County is currently earning about 1.35% interest on
<br />the overall investment portfolio (April 2020 average). The Series 2015 Note carries an interest rate of
<br />1.66% per year. Given the current economy and the recent decrease in interest rates, staff anticipates
<br />further decline in interest earnings going forward. The average portfolio yield has been decreasing
<br />anywhere from 10-40 basis points each month since January 2020. As older investments with higher
<br />interest rates mature, the interest earned on the portfolio will continue to decrease. Agency
<br />investments currently being purchased are earning 50 basis points while treasuries are earning
<br />approximately 20 basis points. The County is holding funds earning a relatively low interest rate, while
<br />paying a comparatively higher rate on the outstanding bonds. Please see the table below for an
<br />estimate of the net savings that could be realized from the early retirement of this debt. For purposes
<br />of this analysis, staff has assumed an average interest rate of 1.35% on County investments, however
<br />this interest rate is expected to decrease over the remaining life of the note which would cause the
<br />savings to increase. For instance, if the County were to earn an average rate of return of 1.0% through
<br />July 1, 2021, the net present value (NPV) savings would increase to over $15,000.
<br />As shown in the table above, the early payoff provides a net savings of $5,707 for the County, and in
<br />turn the taxpayers. The county would forego $40,095 in interest earnings on the $2,970,000 used to
<br />pay off the debt. However, the County would no longer pay the interest on these bonds, which totals
<br />$49,302 over the same period. Even after paying the $3,500 in Bond Counsel and Financial Advisor
<br />fees, there is still a savings. Most importantly, the County would no longer levy the millage needed to
<br />service this debt. For the owner of a $250,000 home (with homestead exemption), this would be an
<br />estimated savings of $15.40 on their 2020 tax bill.
<br />Funding
<br />The July 1, 2020 early payoff amount of $2,970,000, with an additional $3,500 in financial service fees
<br />will be provided from Land Acquisition Bond (note) Cash Forward in the amount of $1,734,275 with the
<br />remainder of $1,239,225 to be provided from General Fund Cash Forward. The Land Acquisition Fund
<br />Balance will change slightly before the July 1, 2020 payment due to tax payments received. Therefore,
<br />these amounts are subject to change. Ultimately, the Land Acquisition Bond (note) Fund Balance will
<br />be completely exhausted before General Fund dollars are used.
<br />Staff Recommendation
<br />Staff recommends that the Board of County Commissioners authorize staff to redeem the remaining
<br />Limited (Land Acquisition) G.O. Refunding Note, Series 2015 in the principal amount of $7,268,000 on
<br />July 1, 2020, and process payments of $3,500 for financial service fees. Staff further recommends that
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<br />Bond Counsel
<br />Interest
<br />and Financial
<br />Investment
<br />Principal
<br />Payment
<br />Advisor Fee
<br />Interest
<br />Net Savings/
<br />Year
<br />Payment Due
<br />(Savings)
<br />Loss
<br />Earnings Loss
<br />Loss
<br />2021
<br />$2,970,000
<br />$49,302
<br />($3,500)
<br />($40,095)
<br />$5,707
<br />As shown in the table above, the early payoff provides a net savings of $5,707 for the County, and in
<br />turn the taxpayers. The county would forego $40,095 in interest earnings on the $2,970,000 used to
<br />pay off the debt. However, the County would no longer pay the interest on these bonds, which totals
<br />$49,302 over the same period. Even after paying the $3,500 in Bond Counsel and Financial Advisor
<br />fees, there is still a savings. Most importantly, the County would no longer levy the millage needed to
<br />service this debt. For the owner of a $250,000 home (with homestead exemption), this would be an
<br />estimated savings of $15.40 on their 2020 tax bill.
<br />Funding
<br />The July 1, 2020 early payoff amount of $2,970,000, with an additional $3,500 in financial service fees
<br />will be provided from Land Acquisition Bond (note) Cash Forward in the amount of $1,734,275 with the
<br />remainder of $1,239,225 to be provided from General Fund Cash Forward. The Land Acquisition Fund
<br />Balance will change slightly before the July 1, 2020 payment due to tax payments received. Therefore,
<br />these amounts are subject to change. Ultimately, the Land Acquisition Bond (note) Fund Balance will
<br />be completely exhausted before General Fund dollars are used.
<br />Staff Recommendation
<br />Staff recommends that the Board of County Commissioners authorize staff to redeem the remaining
<br />Limited (Land Acquisition) G.O. Refunding Note, Series 2015 in the principal amount of $7,268,000 on
<br />July 1, 2020, and process payments of $3,500 for financial service fees. Staff further recommends that
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