Counties seek jail savings through refinancing
WOODSTOCK – Counties served by the regional jail near Front Royal could save money by increasing the debt owed on the facility, experts say.
The Rappahannock-Shenandoah-Warren-Regional Jail Authority Board recently endorsed an option to refinance all or part of roughly $38 million in outstanding debt issued as bonds in 2012. The boards of supervisors for each member county needed to approve the option in order for the jail to proceed with the refinancing.
Shenandoah County supervisors plan to vote Tuesday on whether or not the jail authority should proceed with the refinancing option. Warren County supervisors voted at their meeting Tuesday to approve the refinancing. The Rappahannock County Board of Supervisors plans to vote on the refinancing at its Oct. 2 meeting. All participating counties must approve the measure in order for the jail authority to proceed. The jail board’s Finance and Personnel Committee intends to vote on the matter in October before the bond sale in November.
Ted Cole, bond counsel with Davenport & Company, spent time with the jail authority board and supervisors in Shenandoah and Warren explaining the pros and cons of the refinancing. As instructed by the authority and supervisors, the bond sale will not go forward if the interest rates do not provide the expected savings.
Cole explained in an email Friday that current estimates show the principal amount of debt would increase by approximately $1.4 million through the refinancing. However, the interest payback would decrease, Cole states. The authority would see a total savings over the life of the loan of approximately $3.89 million or about $150,000 per year, Cole explained. The $150,000 in savings would be spread out among the participating counties depending on their 3-year rolling average use of the jail.
Actual numbers will not be finalized until Nov. 1 if minimum savings can be achieved, Cole states.
Warren County pays approximately 57 percent of the local share of the cost to run the jail based on the 3-year rolling average. Warren County would see a savings of about $88,000 if the refinancing results in the estimated savings.
At the Shenandoah County Board of Supervisors special work session earlier this week, Cole spoke to members about the refinancing option.
“Is the $150,000 a month meaningful enough to the RSW to wanna go through this exercise,” Cole asked supervisors.
Some supervisors questioned the need to pursue the refinancing now and whether or not the authority and ultimately the counties would see any benefit, especially if doing so meant increasing the debt principal.
Cole pointed out that interest rates dropped last year. Even though interest rates might have been lower last year, the RSW could have saved less than what experts project by acting this year, Cole said. District 4 Supervisor Cindy Bailey, who represents the county on the jail authority board, asked why the RSW did not pursue the refunding last year.
“There is no question it is a very complicated transaction,” Cole said. “But what I will tell you to the extent this is relevant is they’re done all the time. We’re not breaking new ground here so if that’s a concern for you I would say there’s no reason for the complexity of it to be an issue because (the Virginia Resource Authority) and their consultants do it all the time.”