After hearing a financial consultant’s recommendation on borrowing $60 million in the form of 20-year bonds for expansion of the Bulloch County Jail and repay at a cost of about $24.5 million interest over the full term or early after 10 to 12 years with about $20.8 million interest, the county commissioners voted 3-2 Tuesday to table a decision until their next meeting.

In either case, the immediate funding source for repayment would be the 1% Special Purpose Local Option Sales Tax. An 85.8% majority of Bulloch County voters in a March 18 referendum election approved a six-year extension of the SPLOST.  During that time, the penny tax is projected to raise $138 million or more for building projects and capital equipment purchases of the county government and the cities of Statesboro, Brooklet, Portal and Register.

The wording of the referendum and the intergovernmental agreement gave the jail expansion top priority as a joint project serving the county and the municipalities. It is assigned a $51 million share of the revenue up-front.

If SPLOST revenue within six years surpasses the $138 million predicted amount so that the towns and county get their shares for other projects, additional money beyond the initial $51 million would then be directed to repayment of jail project bonds. The wording of the November 2024 intergovernmental SPLOST agreement – but not the March ballot question itself – also stated that the county could borrow up to $60 million for the jail project.

However, even 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, occurring to the latest 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.

So, the options presented by consultants working with county staff all suggested spacing the jail expansion out over at least two six-year installments of SPLOST, requiring voter consent again in a “2031 SPLOST,” just to cover Phase 1.

 “Obviously based upon the estimated project costs of sixty-one and a half, $51 million only covers a portion of that, not to mention any interest that might be involved, so we have to look at exploring ways to seek longer-term financing options in order for you all to be able to accomplish these projects,” said Doug Gebhart, first vice president for public finance with Davenport & Company.

Davenport & Co. serves as Bulloch County’s financial advisors, so Gebhart led Tuesday’s presentation, with Roger Murray, attorney partner with the bond counsel firm Murray Barnes Finister LLP speaking briefly at times about the process. The $51 million amounts to about $708,000 monthly toward the jail project, under the newly authorized six-year SPLOST collection set to begin Oct. 1, 2025, Gebhart noted.

‘Full faith & credit’

The sales tax produced more revenue than projected the past six years and could do so again, but to be safe, the financial advisors are using conservative projections at this point.

Since the county has a state-authorized Public Facilities Authority, the authority would issue the bonds on behalf of the county, but the commissioners would be pledging the county’s “full faith and credit” to repay them. So the county government’s general fund, in other words the part of the budget that receives property tax, would have to cover the repayments if the sales tax somehow fell short or were not renewed, Gebhart noted.

Davenport looked at two basic scenarios: a 12-year bond term to match two SPLOST cycles, or a 20-year term.

A 12-year bond issuance would reduce total interest cost, with a $59.38 million principal and projected $18.6 million interest, while delivering about $61.58 million to the project fund. This was based on projected interest rate of 4.29%, which Gebhart said was a half-percent higher than currently expected.

With larger amounts going to repay the bonds the first six years, the bond service payments would be reduced the seventh year, to roughly $4.5 million annually beginning in 2032. With a mill of property tax netting currently about $3.5 million for the county, that would be a 1.29-mill “millage equivalent impact,” if it had to be covered from the general fund.

A 20-year bond issuance, with a $60 million principal, would result in about $24.5 million interest cost, if repaid over the full 20 years at 4.58% interest. But with the largest repayments in the first six years, again, and the remainder amortized to “level debt service” beginning the seventh year, it would reduce projected payments for those years to about $2.4 million annually, whether from SPLOST or, if necessary, the general fund.

“That number decreased from four and a half million to $2.4 million, and so the debt service being paid out of the potential next SPLOST decreased from $27 million down to $14.3 million,” said Gebhart.

“So just alone in reducing that debt service … repayment, even though you’re going to be paying slightly more interest over time, it does create a little bit of flexibility as you’re thinking about future projects, future pay-go capital, future budgetary impacts,” he said.

During the presentation, Commissioner Nick Newkirk expressed interest in repaying any bond on a shorter, rather than longer-term basis. The advisors noted that it couldn’t actually be done within the current six-year SPLOST because of its other project commitments and having “maxed out” the revenue available for the jail. But with either a 12-year or 20-year bond, the terms would allow for early repayment after the 10 years without penalty, they noted.

“Going 12 years or going 20, we’re going to preserve the option to pay off early,” Murray said.

20-year recommended

If the commitment to the jail project is continued into the 2031 SPLOST, a 20-year bond issuance could then be paid off early, in 2037, with a total interest cost of about $20.8 million, according to the projections. That, a slide in Gebhart’s presentation stated, would be a savings of roughly $3.7 million in interest.

So, what Davenport & Company was actually recommending, with agreement from county Chief Financial Officer Kristie King, was that the county issue 20-year bonds while preserving the option to repay early.

“It maximizes the funds available from the current SPLOST, and it leaves you the most flexibility in the future. …,” Gebhart said. “It also gives you the ability to allocate future SPLOST dollars to projects that may be critical at the time. … And … it minimizes the potential impact on the millage rates in the general fund if for some reason the SPLOST dollars aren’t available beyond Year Six.”

If the commissioners had adopted the offered resolution authorizing steps toward the 20-year bond, the bond counsel attorneys were set to have the “parameters resolution” ready by the June 17. Then the bond sale could be ready for approval and closing in August.

Discussion and tabling

But Tuesday’s recommendation was not immediately approved.

“Instead of just accruing this additional debt, why wouldn’t we just wait until the end of the SPLOST when we have this $60 million and then go out and build a jail?” asked Chairman David Bennett.

“I think there’s two answers to this,” said Gebhart. “One is that your voters approved it, so they want to see projects built right away, and then two, obviously I think there’s inflationary costs – right? – in building costs.”

Comparing 2018 construction costs to those now would show that the “compounded rate of inflation” would vastly exceed the interest, he said.

Commissioner Anthony Simmons commented that the county’s “Ag Arena”  had been a long-approved SPLOST project but was repeatedly “kicked down the road,” until it ended up costing far more than first projected.

But Newkirk said he doesn’t think voters realized what they were getting with the jail project in the March referendum.

“I know the citizens approved this, but it was also stated that it was going to cost about $61 million to build it, and I don’t know if the citizens would have approved it if they would have saw $78 million and $84½ million. …,” he said. “I don’t know if they would have voted for it if they had known there was going to be a bond attached to it.”

After further discussion, he made the motion to table the resolution. Commissioner Toby Conner seconded, and Ray Davis cast the third “yes” vote to table. Commissioners Simmons and Ray Mosley voted “no” and Timmy Rushing was absent. So the action was tabled.