By a 5-1 vote Tuesday, the Bulloch County Board of Commissioners approved a resolution to borrow $60 million in the form of 20-year, revenue-backed bonds for Phase 1 of the county jail expansion.

If the county takes the full 20 years to repay, that could cost a projected $24.5 million in interest, but officials hope to have the bonds repaid early, in 10-12 years, to save about $3.7 million in interest. All but one of the commissioners preferred that option to a bond with a stated term of 12 years and projected full-term interest cost of just $18 million, after county staff members and a financial advisor noted the effect the shorter term’s larger required annual payments could have on county cash flow in unexpected circumstances.

Some commissioners and other citizens had suggested a “pay as you go” approach to avoid borrowing entirely, but the county’s contracted financial advisors, Davenport & Company, produced a “cash funding analysis” showing that approach could delay the start of construction by nine to 14 years. Depending on inflation in building costs, waiting longer could also cost considerably more than the interest involved in borrowing, the analysis showed.

In any case, the expected funding source is the 1% Special Purpose Local Option Sales Tax. An 85.8% majority of Bulloch voters in a March 18 referendum approved a six-year extension of the SPLOST.  But, with a $51 million up-front share of the revenue earmarked for the jail and the remainder of the first $138 million dedicated to other projects of the county and four cities and towns, money from at least one further six-year SPLOST referendum should be needed to finish paying for the Phase 1 jail project.

During Tuesday morning’s regular semi-monthly commission meeting, the elected commissioners heard first from County Attorney Jeff Akins about the terms of the bond resolutions and the cost analysis.

In the analysis, Davenport looked at two scenarios. The first scenario assumed an annual construction cost inflation rate of 2.5%; the second scenario assumed annual construction inflation of 5%. Both assumed that annual SPLOST collections of almost $8.5 million ($8,496,000, according to the memo) would continue to be directed to the jail project.

“Under the first scenario, construction of the project would not begin for nine years, and the total cost would be $75,029,671. Under the second scenario, construction of the project would not begin for 14 years, and the total cost would be $116,118,925,” stated the memo to the commissioners.

“The only comment I would add to that … would be that the jail project, as you know, was on the SPLOST referendum, and by law you cannot abandon a project that was approved on a SPLOST referendum,” Akins said. “You have to proceed with that project and complete it.”

One exception, added to state law a few years ago, is that a project could be abandoned if determined to be “infeasible,” but this would require a new referendum, he added.

“But under the present circumstances, I think you’re bound to find a way to complete the jail project, and I’m not sure there’s any way to do it other than financing,” Akins said.

He also noted that, while bonds were not mentioned in the ballot question for the March referendum, the intergovernmental agreement on shares of the SPLOST revenue spelled out that the county intended to issue $60 million in revenue bonds for the jail project. The agreement also stated that after the $138 million overall target is reached and the other projects and city shares funded, repaying the jail bonds will be the priority use for any additional revenue.

Davenport’s advice

The commissioners also heard again from Doug Gebhart, first vice president with Davenport & Company, who said their recommended financing option remained the same as in a previous meeting, for the 20-year bonds.

“Clearly, that allows the county a lot of flexibility into the future with the ability to pay it off early in the event that there are surplus collections or there are negotiated additional funds in the next SPLOST,” he said.

On the other hand, this approach is meant “to eliminate any additional concerns or pressures that might occur to the general fund in the future,” Gebhart continued. Although SPLOST is the designated revenue source, the county must be pledge its “full faith and credit” to repayment of the bonds. So, if voters rejected the next sales tax renewal or if the revenue were shifted to other priorities, the general fund, and therefore property tax, would be on the hook to make the payments.

If that happened, with a 20-year bond the potential drain on the county’s general fund for the remaining years would be about $2.4 million annually, or roughly 0.68 to 0.69 mill at the current tax digest value. But with a 12-year-bond, a shortfall could pull about 1.3 mills, or roughly $4.5 million annually from the county’s cash flow, Gebhart estimated.

Commissioners decide

Chairman David Bennett urged the commissioners to take action.

“We have to build a jail,” he said. “This was something that was voted on by the people of this county, and there’s going to be some that’s going to say that the turnout was low, there were only 2,500 people out of 85,000 people in the county, and I understand that. But you had an opportunity to vote, and the people of this county voted to approve this SPLOST to fund a jail.”

Phase 1, to construct a new jail housing unit with 160 beds for male and 128 beds for female inmates, would cost almost $61.6 million, according to a recent estimate. Phases 2 and 3, to demolish the older, neighboring Bulloch County Correctional Institution facility and build replacement and expansion buildings for 160 and 136 inmates, are projected to cost almost $39.5 million and almost $66.4 million, respectively. But only Phase 1 is being funded at this time.

Interim County Manager Randy Tillman, in contact with Sheriff Noel Brown, reported that the jail’s current general-population capacity is 443 pre- and post-trial detainees. As of Tuesday, there were 355 individuals being held, so 80% of the beds were full. But with requirements to segregate male and female detainees and those from rival gangs or who are otherwise a danger to others, 80% is “operationally” full, said Tillman, who was previously BCCI warden after retiring from a career in Georgia Department of Corrections leadership.

Commissioner Nick Newkirk wasn’t holding to the pay-go approach at this point, but he preferred the option for shorter-term bonds.

“I’m leaning more toward a 12-year bond,” Newkirk said. “That would save us almost $7 million in the end, versus a 20-year, which is basically a whole year’s worth of SPLOST that we could use on something else.”

However, his motion for the 12-year option died for lack of a second. Commissioner Toby Conner’s motion for the 20-year option, seconded by Commissioner Ray Mosley, passed with Newkirk voting “no.”