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Despite being told last month that they might save by refinancing, magistrates were told last week that refinancing the county's jail debt might not save any money after all.
Representatives from Ross, Sinclaire & Associates investment firm, which has offices in Kentucky, presented some figures to magistrates at the regular Taylor County Fiscal Court meeting last Tuesday.
Taylor County Judge/Executive Eddie Rogers said he asked the representatives, David Jenkins and Joe Lakofka, to give magistrates a second opinion as to whether the county should refinance the jail's debt.
The debt stands at about $14.7 million, of which nearly $9.8 million accounts for principal debt.
The county currently pays $725,130 a year on jail debt, which includes a principal payment in August and interest payments in August and January. The county must have its bonds until 2016 and would pay a penalty if refinancing before then.
Magistrates first discussed the feasibility of refinancing the debt in January. At that month's meeting, Michael George, a financial advisor who works with Kentucky Association of Counties, and officials from First Kentucky Securities said they believed the county could save about $300,000 a year by refinancing the debt.
After that discussion, magistrates agreed to move forward with researching their financing options.
George told magistrates last month he believed the magistrates should prepare to refinance and do so when interest rates are lowest. If they refinanced then, he said, the county could save about $150,000 a year.
After that discussion, magistrates agreed to begin the paperwork to refinance and finalize it when interest rates will yield the most savings.
Last Tuesday, Lakofka told magistrates he has seen several entities refinance in the past year and a half and he advises magistrates advertise for bids to hire a financial advisor.
He said he researched the county's current debt, along with up-to-date interest rates, and the results show the county wouldn't save anything by refinancing now.
As the county moves toward the 2016 date in which it must keep the bonds, he said, savings will likely increase.
If refinancing now, he said, the county would see a net loss of about $500,000.
"The rates haven't moved enough to make it worthwhile," he said.
Lakofka said he has been watching the county's debt for the last couple of years and even though interest rates have dropped, he still doesn't believe it's the right time to refinance.
Magistrate Matt Pendleton asked why magistrates were told last month the county could save about $150,000 by refinancing, but if they refinanced now, would lose nearly $500,000.
"Who do I believe?" Pendleton asked.
Lakofka said the county wouldn't save by refinancing now because of penalties and current interest rates.
He said magistrates need to know financial firms can't negotiate interest rates. The only difference in using one firm instead of another, he said, is the fees the company charges.
Lakofka said he recommends magistrates seek bids for financial advisors and ask what companies will charge for the service. His company, he said, is competitive and has lots of experience working with schools and governmental agencies.
Magistrate Tommy Corbin said he, too, doesn't understand why magistrates would be told they would save money one month and lose money the next.
Lakofka said there might have been a time when the county could have saved money, but with current interest rates and fees, the county wouldn't save now.
Rogers said he would like magistrates to allow Lakofka's company to prepare a proposal as KACo officials did so magistrates can compare the two.
"So we've got something to compare," he said. "Apples to apples."
Pendleton asked if the county would have to pay for a financial advisor, even if magistrates decide not to refinance.
Lakofka said his company wouldn't charge for its services until magistrates go ahead with refinancing with Ross, Sinclaire & Associates.
Rogers said Campbellsville University and other local entities have worked with Ross, Sinclaire & Associates.
Magistrate John Gaines made a motion to allow Lakofka to submit a refinancing proposal to compare to the one KACo submitted. Magistrate Ed Gorin seconded the motion, which was unanimously approved.
For more from Tuesday's meeting, see Thursday's issue.