The Oconee County Board of Commissioners last week took final action to borrow $4.285 million to build a new road to promote further commercial development in the busy Epps Bridge Road corridor.
In order to avoid asking the voters to approve the bond sales, the commissioners agreed to have the county’s Industrial Development Authority do the actual borrowing.
The schedule for the bond calls for payments totaling $4,881,579 over the 10-year terms of the bonds.
The interest rate is 2.385 percent.
The new three-lane Parkway Boulevard Extension will run from the Oconee Connector opposite an existing entrance to Epps Bridge Centre to just west of Kohl’s department store and will serve as the entranceway to the proposed Epps Bridge Centre Phase II.
Response To Questions
Oconee County Board of Commissioners Chairman Melvin Davis allowed for public comment on Tuesday night before the Commission voted on the bond sales, and citizen Sarah Bell seized the opportunity.
She asked the commissioners why they were building a roadway for a developer and why they were borrowing money to do it.
Davis never looked at Bell while she spoke, scribbling notes on a piece of paper instead, but as soon as Bell stopped speaking Davis asked County Attorney Daniel Haygood the interest rate on the bonds, as the video below shows.
John Daniell was the only one of the five commissioners who chose to respond to Bell, repeating and elaborating on analyses he had presented earlier about the return on investment based on continued commercial development.
Daniell told Bell that the county was borrowing “as a cash flow issue” and that “at the interest rate it doesn’t make sense to put our cash flow in jeopardy.”
Daniell didn’t say this, but the county’s audit showed that the county on June 30, 2015, had $9,718,744 in its Fund Balance, or reserve fund account, up from $9,156,802 a year earlier.
“We’re paying for the road because it is an economic development road,” Daniell said. “The return on investment is there.”
Daniell said the county wasn’t building the road for Atlanta developer Frank Bishop, who plans to expand his Epps Bridge Centre across the Oconee Connector to the land that will be opened up by Parkway Boulevard Extension.
Daniell told Bell that the Epps Bridge Centre Phase II will bring in about $800,000 a year to the county’s schools “without a single kid going to school.”
The school budget is entirely separate from the county budget. The calculation is based on both sales tax revenue and property tax revenue for the schools.
Daniell said his calculations require only a small number of the stores projected for the new mall to open for the county to gain enough from its 1 percent Local Option Sales Tax and property taxes to pay back the loan.
The purpose of the loan is to cover the lag between when the revenue comes in and when the county needs the money, Daniell said.
If the money comes quicker, there is no prepayment penalty, he said.
If the money doesn’t come in from the tax revenue, “then we have to come up with the money,” he told Bell.
The bond schedule calls for the county to make is first payment of $68,202 on Nov. 1 of this year and its first payment against principal on Nov. 1, 2017. South State Bank is buying the bonds.
The county will make two payments in 2017 and in each year through Nov. 1, 2025, with those payments being about $532,000 each year.
That brings the cost of borrowing the money to $596,579, or 13.9 percent of the principal.
The Commissioners could ask the Industrial Development Authority, which it controls, to pay for some of that debt out of Special Purpose Local Option Sales Tax or other revenue, such as from money earned from the lease payments on the building used by the Post Office in Watkinsville.
It is not doing that.
Daniell is estimating that Epps Bridge Centre Phase II conservatively will bring in $555,000 in new tax revenue through the 1 percent LOST tax each year.
That is more than the county is collecting on a monthly basis from LOST at present.
December collection was $494,367, according to a report county Finance Director Wes Geddings gave to the Commission on Jan. 26.
Daniell also is calculating that the money generated will be new, that is, that Epps Bridge Centre Phase II will not take sales away from other retail sales in the county.
In December of 2015, LOST revenue actually was down by $22,137 from a year earlier, and sales in November and October were up only slightly from a year earlier, despite the opening of major new retail outlets in the existing Epps Bridge Centre last year.
County Attorney Daniell Haygood told me on Thursday that the Commission had three options for borrowing the money for Epps Bridge Parkway Extension.
The first was to issue general revenue bonds, but they require a referendum, and that would have meant that the BOC would have had to put the question to the voters either in May or November.
The second option is to let the IDA issue the bonds, with the county agreeing to pay for the bonds with an “intergovernmental agreement without a referendum.” That is the route the Commission took.
A third option would have been to issue directly revenue bonds or enter into lease purchase agreements without a referendum, “but those don’t work very well for road projects,” Haygood said.
The Oconee County Board of Commissioners on Jan. 8 approved a $3.35 million contract with Simpson Trucking and Grading Company of Gainesville for construction of Parkway Boulevard Extension.
The county borrowed the $4.3 million to include contingency funds, right of way acquisition and $200,000 for the beautification of Mars Hill Road, currently under reconstruction, and Parkway Boulevard itself.
Haygood proposed creation of a tax district for the commercial area around Epps Bridge Parkway, Parkway Boulevard Extension and the Oconee Connector to generate funds in the future to be used to maintain the area.
IDA Chair Rick Waller said the money also should be used to beautify Mars Hill Road or other areas of the county.
The video below is of Haygood’s presentation to the IDA regarding details of the bonds and of discussion about the tax district.
In the video, Haygood said that no retailer is going to commit to the newly opened retail area until the road is built.
The full video of that IDA meeting, shot by Sarah Bell, is available here.
Hard Labor Creek
In past meetings, and again at the BOC meeting on Tuesday night, Haygood discussed the bond sales for Parkway Boulevard Extension in the context of bond sales to refinance the debt the county is carrying for the Hard Labor Creek Regional Reservoir now filling in southeast Walton County.
Haygood said that the county had a debt of $19.5 million for its share of the reservoir costs and had refinanced $8.1 million of that last fall. Walton County is the dominant party in the reservoir project.
Haygood said that $10.4 million of the Hard Labor Creek debt is available for refinancing.
The county and the IDA have available a category of bonds called bank-qualified tax exempt bonds which, because of their tax treatment, bear a lower interest rate than normal tax exempt bonds, Haygood said.
But the county and the IDA are limited to $10 million of these bank-qualified tax exempt bonds per year.
If the county had used those bank-qualified tax exempt bonds for the Parkway Boulevard Extension, the rate would have been 1.95 percent, rather that the 2.385 rate the county received.
The Commission on Tuesday told Haygood to go forward with refinancing $10 million of the Hard Labor Creek debt through these cheaper bonds.