With interest rates in America so low and Nye County finally free from a bond clause that prevented it from doing so, earlier this year the county began the process necessary to refinance the bond that had been taken out to fund the construction of the Nye County Detention Center in Pahrump.
That bond, secured in 2010, totaled over $21.8 million and after a full decade of payments, the amount owed is still more than $18.8 million. When discussing the item in September, commissioners were told that they could likely secure a lower interest rate than the existing 4.1% rate and, excited by the prospect of saving taxpayer dollars, they authorized JNA Consulting to send out a Request for Proposal. Various banking institutions were able to respond with refinance terms and figures and JNA Consulting was back before the commission at its Nov. 10 meeting with the results.
Municipal advisor John Petersen explained for commissioners that the Request for Proposal process was quite a bit more fruitful than had been expected.
The refinancing option selected by JNA Consulting as the best choice came from Nevada State Bank and resulted in an even lower interest rate than had been originally anticipated, meaning nearly twice as much in savings as had had been projected. When discussed in September, the county was looking at a potential of $2.5 million in savings but that amount is now estimated at between $4 and $4.5 million.
“After that meeting on Sept. 15, we sent out the RFP (Request for Proposal), we solicited the bids. Ultimately we received three responses in total and based on those responses, we believe that the response from Nevada State Bank (a division of Zions Bancorporation) is the best response to our request. Zions would refinance the 2010 bond at an effective rate of approximately 1.93%. That would be over the next 20 years and ultimately would results in savings to the county of approximately $4.6 million,” Petersen stated during the Nov. 10 meeting.
As detailed in the accompanying documentation, the county’s average annual savings would come to about $220,000 and Petersen was sure to note that the life of the loan would not be extended in any way. The jail bond will still mature in 2040. All the fees associated with the refinancing, totaling $103,000 to be collected by JNA Consulting Group and Sherman &Howard, are rolled into the new bond, so there are no out-of-pocket expenses to the county.
“The one note I will make on Zions’ proposal is, they are asking for a variable rate component to this refinancing. That would apply to the bond that is payable beginning in August 2036 through August 2040. That rate it initially locked at a 2.07% and that rate lock is good for 15 years. After that 15-year rate lock, it would be subject to a variable reset,” Petersen added, remarking that even if the variable rate reset resulted in the maximum interest rate that would be allowed per state law of 5.24%, the county would still realize at least $4 million in savings over the remainder of the life of the loan.
Nye County Commissioner Leo Blundo made the motion to adopt the ordinance authorizing the refinancing, which was seconded by commissioner Lorinda Wichman and passed with all in favor.
“Thank you Mr. Petersen,” commission chair John Koenig said as the item came to a close, with commissioner Debra Strickland chiming in, “Mr. Petersen, Ms. Savannah Rucker (Nye County comptroller) you did an excellent job. This gives us the ability to go after other bonds and be able to pay for them. Thank you so much.”
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