WOODSTOCK — The Shenandoah County Industrial Development Authority unanimously voted at its meeting Monday to accept a resolution that would result in the IDA issuing its lease revenue bonds to finance all or a portion of the costs of various expenditures for the county and the Shenandoah County School Board.
IDA chairman Vincent Poling, Vice Chairman Jay Winkfield, members Beverly Butterfield, Michael Koontz and Abby Walters voted in favor of accepting the resolution. Members Mike Funk and Bill Holtzman were absent from Monday’s meeting, which was held in the board room of the Shenandoah County Government Center.
The lease revenue bonds total $6 million, and the loan would be over 10 years.
According to proposal documents, the funds would include, but aren’t limited to, various school facility improvements including costs associated with design, construction, renovation, refurbishment, expansion and equipment improvements of schools and auxiliary buildings. The money would also be used to purchase county and school vehicles; engineering and legal fees; insurance expenses; and more.
“This is a loan that the IDA would be assisting the county and the school system with about $6 million. The bulk of it is to go for capital expenditures for the school board, but there is some money that’s in there that would be county suspending, primary for fleet,” County Attorney Jordan Bowman reminded the IDA. “Because there is a mixture of both school and non-school borrowing, it takes some of the traditional borrowing options away. This has become the type of transaction that has become more and more common, which is a lease financing.”
Signal Knob Middle School would be used as collateral on the loan, primarily because the title work is simple, Bowman said. The school is also worth close to $6 million, he added.
Bowman said the school board and the county will lease Signal Knob to the IDA. The IDA will then borrow $6 million and lease the school back to the county and the School Board. The amount of the rent that the county pays will match the loan payment.
The note that the IDA will sign to the bank will stipulate that the loan payments are only paid from the rent the county pays to the IDA for the school.
“If the county for some reason doesn’t appropriate that, it’s not a situation where the bank comes in and comes after the IDA for the money,” Bowman said. “The bank’s security is that the IDA will give them an interest in the school as collateral.”
Ben Wilson, working with Davenport Public Finance, presented the IDA with a recommendation to choose Sterling National Bank from a list of seven proposal responses. The request for proposal was sent to over 100 financial institutions nationwide.
In his presentation, Wilson said Sterling provided the lowest interest rate of 1.35% of the top three choices, which included Key Government Finance (1.53%) and Zions Bank (1.69%).
Sterling National Bank, which is based in New York, is “very active” in municipal finance opportunities in Virginia, Wilson said.
Sterling also provided the lowest estimated debt service, Wilson said. With Sterling, the total debt service would be $6,423,925 compared to $6,494,644 with Key Government Finance and $6,562,752 with Zions Bank.
The only potential drawback to choosing Sterling, Wilson said, was that the prepayment provisions for the bank stipulate the loan couldn’t be repaid in whole until Aug. 1, 2027. But Sterling and Bowman both advised that the lower interest rate was worth accepting that prepayment provision.
Wilson and Bowman said the loan shouldn’t have any impact on the IDA’s ability to engage in other projects over the course of the 10-year loan.
The Shenandoah County Board of Supervisors will vote tonight to adopt the final resolution and form of financing. If it is adopted, it will must be approved by the School Board at its Oct. 14 meeting. The loan could be finalized by Oct. 21.