County commission gives nod for refinancing $8.75 million
By: By JOHN BRANNON Messenger Staff Reporter
Just trying to save the county some money.
That terse sentence summarizes a plan that commissioners Tim Doyle and Danny Jowers presented to the Obion County Commission Monday.
Doyle is chairman of the finance committee, while Jowers is chairman of the budget committee.
The commission met at 9 a.m. Monday at the Obion County Courthouse. All 21 commissioners answered clerk Vollie Boehms’ roll call. Commission chairman Ralph Puckett of South Fulton presided.
Scott Gibson, first vice president of the Knoxville office of Morgan Keegan & Company, Inc., assisted Doyle and Jowers in presenting the plan to the commission.
Their goal was to acquire the commission’s approval to give the finance committee authority to proceed with refinancing a hefty portion of the $17.5 million remaining on a loan acquired in 2004 to build a new Obion County Central High School complex. The initial loan was $17 million; the school board later borrowed an additional $1 million.
The finance committee had earlier endorsed the plan and recommended it to the full commission.
The plan, according to Jowers, is to convert 50 percent of the $17.5 million — $8.75 million — from a variable interest rate to a fixed interest rate.
“We’re not borrowing money. We’re simply refinancing a portion of the debt remaining,” he said. “If rates go down further, obviously the variable rate would be attractive. But with everything we’re looking at from the feds, we think they’re going to start raising rates. Inflation is going to tear them up.”
Half the $17.5 million would be converted to a fixed rate of “somewhere between 4.25 and 4.5 percent. That will be for the next 23 years,” Jowers said.
The variable rate at this time is 4.1 percent. “When they sold us on this variable rate, they said, ‘In 25 years, this thing has never been up.’ Well, it’s already past what they said it would be. So if the feds are jacking up interest rates, then that rate is going to go higher, also,” Jowers said.
Gibson said variable rates go up and down every day. “The county’s been paying 4 percent to 4.1 percent. What we’re trying to do is take some risk off that,” he said. “The rate could go down below 4 percent; it could also go as high as 6, 7 and 8 percent. There’s no limit on how high it could go.
“What rate will it be on when it’s fixed? Depends on what the rates are today. We’ve been between 4.2 and 4.5 percent. We’re going to be below 4.5 percent. Whatever the rate is when we lock it in, it’ll be locked in from now to the year 2031.”
But what about the balance, the other $8.75 million on the loan? It will continue on a variable-rate basis until a later date. “We’ll look at that next year and renew it at that time,” Jowers said. “We can only do a portion at a time.”
On motion by commissioner Dwayne Hensley and second by Jowers, the commission voted 21-0 for the finance committee to “move forward” with the plan.
The finance committee will meet at 9 a.m. Nov. 27 at the courthouse to do just that.
“We’re basically saying we are going to go to bed tonight knowing that no matter what happens, we’re going to be paying between 4.25 and 4.5 percent interest on 50 percent of the overall loan,” Jowers said. “We won’t be at the mercy of the market on that part of the loan. God forbid that we ever again see the (Jimmy Carter) days of 21 percent interest.”
Published in The Messenger on 11.20.07
Obion County Commission