Wednesday, September 05, 2018

Hearing On $155 Million Bond Sale For Presbyterian Homes Gives Citizens What May Be Sole Chance To Offer Comment

***Largest Bond Issue To Date***

Oconee County will hold at 2 p.m. tomorrow at the Courthouse in Watkinsville what could be the only public hearing on the issuance of $155 million in revenue bonds for Presbyterian Village Athens.

County Attorney Daniel Haygood will serve as the hearing officer at the meeting, which is required by the United States Internal Revenue Service before the county can approve the issuance of the tax-exempt bonds.

Officially known as a TEFRA hearing, from the Tax Equity and Fiscal Responsibility Act of 1982 that requires it, the hearing gives the public an opportunity to comment on the use of the tax-exempt funds by the county.

The $155 million authorization dwarfs bonds sold by the Industrial Development Authority in the past.

Westminster Presbyterian Homes Inc. of Quitman can use the revenue generated by the bonds to refinance and finance the costs of acquiring land and for construction, furnishing and equipping its continuing care retirement community planned for U.S. 441 north of Hog Mountain Road.

Haygood and attorney Jim Woodward, who advises the county on bond sales, said issuance of the bonds by the Development Authority does not obligate the Authority or the county in any way regarding the bonds.

Bond Requests

The Oconee County Industrial Development Authority passed a resolution in May preliminarily approving the issuance of revenue bonds for Presbyterian Homes pending receipt of further documents specifying, among other things, the amount to be borrowed.

Presbyterian Homes representatives used the figure of $150 million at that time for the bonds, but also said that the actual amont requested likely would be lower.

The hearing tomorrow will be based on the $155 million figure submitted by Presbyterian Homes.

To date, the Authority has issued bonds totaling $76.7 million for projects in the county.

Industrial Development Authority

The Industrial Development Authority was created in 1962 and is part of the Georgia Constitution. The composition of the Authority was modified slightly in 1987.

Haygood 8/16/2018

It consists of five members: Courtney Bernardi, president of the Oconee County Chamber of Commerce, John Daniell, Oconee County Board of Commissioners chair, Brock Toole, Dave Shearon, mayor of Watkinsville, and Rick Waller.

Bernardi, Daniell and Shearon are ex-officio members of the Authority, as spelled out in the state Constitution.

The 1987 modification removed the president of the Athens Area Chamber of Commerce from the membership list and replaced that person with the president of the Oconee County Chamber of Commerce.

Toole and Waller, who is chair of the Authority, were appointed by the Oconee County Board of Commissioners for four-year terms. The term for both will expire at the end of 2021.

Waller owns an insurance company. Toole is chief operations officer for Oconee County Schools.

Authority Vote

The Authority also has six members designated as Associates, all appointed by the Board of Commissioners.

They are Wayne Bagley, a businessman who also is on the Board of Education, Matt Elder, businesman, Terri Glenn, mayor of Bogart, Ed Perkins, retired businessman, Don Phillips, businessman, and Linda Carol Porterfield, realtor.

Following the hearing tomorrow, the Industrial Development Authority must approve a bond resolution for the $155 million request of Presbyterian Homes.

According to County Attorney Haygood, only the five Constitutional members can vote on that resolution.

The Authority meets at 4 p.m. on Monday (Sept. 10) at the Chamber of Commerce, 55 Nancy Drive in Watkinsville.

A vote on a bond resolution does not appear on the agenda for the Monday meeting released today (Wednesday) by County Clerk Kathy Hayes, who serves as secretary for the Authority, but the group can amend its agenda to take up issues not announced in advance.

The agenda does allow for citizen comment near the end of the meeting.

Procedures

County Attorney Haygood told me that Waller is not required to call for citizen comment before the Authority votes on the resolution–whenever that is–though he is allowed to do so.

Once the Authority acts, the issue goes to Commission Chair Daniell, according to Haygood and Woodward.

Daniell can sign off on the Authority resolution alone, or he can put it on the full Board of Commissioners agenda.

Daniell is not required to allow public comment, according to the two attorneys.

At some later date, a bond hearing will take place before the Oconee County Superior Court.

The Court hearing deals with specified legal defenses for issuance of the bond, and most of these are procedural, according to Haygood. It also is possible to challenge whether the Authority has the power under its charter to issue the bonds.

The Georgia Constitution states that the Oconee County Industrial Development Authority has the power “To borrow money, to issue notes, bonds and revenue certificates, to execute trust agreements or indentures, and to sell, convey, mortgage, pledge and assign any and all of its funds, property and income as security therefor.”

No Liability To County

The legal notice for tomorrow’s hearing states that the bonds the Authority will issue “will not be obligations of Oconee County, or of the State of Georgia or of any county, municipal corporation, or political subdivision of the State of Georgia. “

The bonds will not be paid from taxes “but will be payable by the Issuer solely from amounts to be paid or provided by the Borrower,” according to the legal notice. The Authority is the Issuer, and Presbyterian Homes is the Borrower.

The Georgia Constitution states that the Oconee County Industrial Development Authority “shall not be authorized to create any manner of debt, liability or obligation against the State of Georgia or Oconee County.”

What the Authority can do–and a major reason for its existence--is issue bonds without getting citizen approval. If the county issues bonds, it must put the issue on the ballot.

Why It Works

The Authority is allowed by federal law to issue tax-exempt bonds for nonprofit organizations, which Westminster Presbyterian Homes Inc. is.

The purchaser of the bonds gets a tax exemption and accepts a lower interest rate.

The county serves as a what Haygood and Woodward call a “conduit.” The county sells the bonds and passes the money to the nonprofit organization, in this case, Presbyterian Homes.

Presbyterian Homes thus is able to borrow money at a lower rate than would be possible without the Authority serving as the “conduit.”

The contract for the bond sales protects the county and the Authority, Haygood explained in series of email and telephone exchanges over the last month. The contract states that neither is liable for the bonds, and this is what is reviewed in the Superior Court hearing.

The IRS allows the Authority to charge a fee for its service of one-eight percent per year of the face amount of the bonds.

For a $155 million bond, that would amount to $193,750 per year for what is expected to be about five years.

Bond History

The Authority also can issue bonds for a for-profit organization and has done so in the past, but, according to Haygood, the action “would have to qualify as furthering the purposes of the IDA under its enabling legislation.”

The Constitution states that the Industrial Development Authority has the power “to encourage and promote the expansion and development of industrial and commercial facilities in Oconee County so as to relieve insofar as possible unemployment within its boundaries.”

Haygood said he does not believe the Authority issued any bonds before 1989, based on his records.

Since that time, the Authority has issued bonds for five organizations, three of them nonprofits.

University System, Athens Academy

The Authority issued $28.9 million in three different bond for the University System of Georgia, starting in 2003, for construction and refinancing of the Office of Information and Instructional Technology (OIIT), 2500 Daniells Bridge Road.

It issued two additional bonds for the University System of Georgia, again starting in 2003, for construction and internal financing of what is now the Oconee Campus of the University of North Georgia. Total of the two bonds was $15.1 million.

In 2009, the Authority issued $9 million in bonds for Athens Independent School (Athens Academy), and in 2013 it issued another $9 million to the school. Both bonds were for construction of new facilities.

In 2012, the Authority issued $10.4 for Caterpillar.

In 2016, the Authority issued $4.3 for Oconee County for construction of Parkway Boulevard.

Haygood said the Authority also issued $140 million in bonds for Caterpillar as part of a tax abatement program, but that did not fit into the same category as any of the other bonds the Authority has issued since it did not involve the real movement of funds.

Permits

Presbyterian Homes has cleared much of the 79 acres it owns along U.S. 441 for its Presbyterian Village Athens.

The county issued a temporary sign permit in April of 2017 for the sign that remains on the property after Presbyterian Homes, at the county’s request, removed the signage on the fence it constructed around the construction site.

Adrian Bishop Housemovers, with a Watkinsville Post Office Address, obtained a permit on June 25 for removal of a house at 1030 Wellbrook Road on property owned by Presbyterian Homes.

Presbyterian Homes applied for five demolition permits for structures on that same Wellbrook Road property on Aug. 15, but, according to Guy Herring, Planning and Code Enforcement Department director, the demolition already had taken place.

The company had to pay double the $50 fee for each permit as a penalty.

Liz Smith, permit clerk in Herring’s office, said on Aug. 24 that the permits had been issued.

As of Friday, the county had not issued any other permits for Presbyterian Homes.

2 comments:

Charlie and Joyce Baugh said...

This is a well written article and provides very thorough information on the issuance of these bonds. Appreciate the work on the article as I know it took a lot of time to dig out all the facts. I wonder if any bond buyers have been able to get through the legal wall in order to get at the issuing entity anywhere in Ga. There must have been some failed projects that caused the bonds to be worthless or at least lose value.

Xardox said...

I have some work to do to find out how an entity issues bonds
while at the same time incurring no liability. All I know is it happens.
Now to try to understand the mumbo-jumbo.