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Jail Completes Refunding of Lease Financing

At the regular meeting of the Daviess-DeKalb County Regional Jail District Board of Directors held on Dec. 16, legal documents implementing a $1,860,000 current refunding of the remaining $2,215,000 Series 2006 Lease Certificates of participation were signed.

The district selected L.J. Hart & Company of St. Louis as its municipal bond underwriter after hearing proposals from three other investment banking firms.

The average rate of interest for the Series 2011 Certificates is approximately 1.925% compared to about 4.573% on the prior Series 2006 Certificates. It produces a net future interest savings of $150,559, which it achieves on a relatively level basis each year from Sept. 1, 2012, through the final payment of Sept. 1, 2016.

The District Administrator Robert Gray expressed enthusiasm for the financing plan because it immediately reduced principal by $355,000 through the elimination of the debt service reserve fund that was not able to return much reinvestment income in the previous financing.

“By reducing our principal, the district is able to earn the equivalent of 2.25% on those fund balances,” Mr. Gray stated.

The interest rates on the refunding certificates range from 0.75% on the certificates maturing on Sept. 1, 2012, to 2.25% for those coming due on Sept. 1, 2016. L.J. Hart & Company offered the certificates to local commercial banks with the BTC Bank acquiring $980,000 for its portfolio. The strong support of the BTC Bank was very important to the success of the refunding activity.

The Daviess-DeKalb County Regional Jail District was formed on May 16, 2005 by Daviess and DeKalb counties and voters of the two counties approved a ½ cent sales tax at the Nov. 8, 2005, election to provide for the acquisition and future operation of a 270 bed detention center on approximately 10 acres in Pattonsburg on Feb. 15, 2006. It is governed by a commission composed of four commissioners; who are also the presiding commissioners and sheriffs of each county.

The current officers are Harold O. Allison, chairman and presiding commissioner of DeKalb county, Randy Simms, vice chairman and presiding commissioner of Daviess county, Ben Becerra, secretary and sheriff of Daviess county and Wes E. Raines, treasurer and sheriff of DeKalb county.

One of the special features that the district liked about the refunding was the short term optional redemption (call) provision of Sept. 1, 2014, at no penalty. “This call feature makes it possible for the district to apply any surplus sales tax revenues in reserve to be better invested by making prepayments of the lease principal and thereby improve the rate of return on those balances,” Chairman Harold O. Allison remarked.

The closing for the refunding is scheduled to occur on Dec. 29, 2011, when L.J. Hart & Company pays for the certificates. The Series 2006 Certificates are to be called in early redemption on Jan. 1, 2012.

“It is nice to save this $150,559 of future interest expense and achieve considerable flexibility for meeting the remaining payments. We are also pleased with the support of the BTC Bank of our project,” stated Vice Chairman Randy Simms.

The legal documents for the financing were provided by John W. Brickler, Esq., of the law firm Spencer Fane Britt and Browne LLP from Clayton in its role as special tax counsel.