On Monday, Custer County completed financing for the $7,500,000 in bonds that will finance the Detention Center project, which will include construction of a new detention center to replace the historic but severely sub-standard 1906 jail and remodeling of the 1980s-era, below-ground Emergency Operating Center.
The good news is that the final interest costs, as calculated by D. A. Davidson, will be about $1,200,000 lower than originally projected. The costs presented to voters last year were based on an interest rate not to exceed 6.50 percent. However, D. A. Davidson figures the true interest cost of the bonds is 3.276 percent. This will mean that repaying the bonds will cost taxpayers less over the life of the bonds.
County Commissioners Kevin Krausz said Tuesday, “We’re excited that the interest rates came in as low as they did. It will save the taxpayers in the long run.”
At the time of last year’s bond election, the estimated annual impact on a home with an assessed value of $100,000 would be $54.59. Based on the final actual rate, the impact to a home with an assessed value of $100,000 would be $43.84, a reduction of about 20 percent.
The voters approved the issuance of the bonds on September 10, 2013. The term of the tax-exempt bonds is 20 years, with a final maturity on July 1, 2034. Yields to investors will range from 0.30% in the first maturity in 2015 to 3.71% in 2034.
The bonds were offered and sold through D. A. Davidson & Co. to local individual investors as well as institutional investors and other purchasers statewide and nationwide.
As part of the financing process, Custer County received an “A+” credit rating with a stable outlook on the bonds from Standard & Poor’s Rating Services. The service specifically stated that the favorable rating is due to the county’s “Strong management conditions with adequate policies but consistent ability to maintain balanced budgets; Very strong budgetary flexibility with 2012 audited reserves at 49% of general fund expenditures; Strong budgetary performance with operational and total governmental surpluses in each of the past three fiscal years; Very strong liquidity providing very strong cash levels to cover both debt service and expenditures; and Strong debt and contingent liabilities position, benefiting from only 1.6% of overall net debt as a percentage of market value.”
Somewhat tempering the above strengths is Standard & Poor’s view of the county’s limited economy, with wealth and incomes below national averages.
Custer County opened bids for the detention center project in March of this year, and construction is expected to begin at the end of April. Completion of the project is expected by July of 2015.