Supervisors look at refinancing Yakima bonds

A “very efficient opportunity” could reduce County sales tax 11 – 13 years sooner than expected

Everybody’s been taking advantage of low interest rates, and La Paz County is no different. The Board of Supervisors held a public hearing on a way to save money and reduce the number of years it will need to pay off a court judgment it incurred several years ago.

Since 2011, the County has been paying on a judgment bond it incurred when it lost a lawsuit against Yakima, a company which entered into a contract with the County some years beforehand to run a biosolids treatment facility here. When Yakima won the suit, the County had to find money to pay the judgment, and took out bonds to do so. The original bond was for $18.1 million, and was financed at an interest rate of 5.13 percent, with the money to pay it down coming from a temporary sales tax hike of 1 percent.

Mark Reader, Managing Director at Stifel, Nicolaus & Company, a financial planning and underwriting firm who has been working with the County for some time, gave a presentation that laid out a new proposal.

“We think we’ll be able to save the County some money here,” he said. “We could pay off the debt significantly earlier than we were and eliminate the sales tax earlier.”

Reader said that the sales tax revenues are coming in very steadily, and creating a surplus in the account that is used for paying off the bond.

“Right now the County has north of $3 million in that account of excess funds, and all in all that’s good news. We’d like to utilize that extra cash and pay down the debt with it. The municipal bond market is very strong. We’re at a very opportune time to take advantage of the lower interest rates.”

Reader is proposing that the County take the existing $16 million in outstanding debt, pay off $3 million of it, and then finance the remaining balance at a much lower interest rate – hopefully “mid-3 to high-3 percent” – shortening by around 11 or 12 years the term of the loan. The new payoff date may be closer to the year 2025, or a new term of less than 10 years, according to Reader.

“We have a potentially very efficient opportunity here,” he said.

In addition, if County revenues stay as stable as they have been, excess funds may continue to accumulate as the 1 percent sales tax collects more than the amortization schedule requires, which presents an opportunity to pay it down even quicker. County Administrator Dan Field asked for clarification on that, saying that if the County continues to have an overage each year of around $400,000 in excess funds, as it has been, the debt may be paid faster than schedule.

Reader said that is true. “We will be required to pay the bonds down with that money on an annual basis, so if you do the math, [if economic conditions stay the way they have been] if we could get $4 million [excess] it may even get us there a few years earlier.”

Supervisor King Clapperton remarked that that would be good for his children and grandchildren.

The Supervisors called for public comment but no comments were received at the meeting. Supervisor D.L. Wilson said comments could be filed at the County’s website or in writing.