Campbell County supervisors learned Monday that the county faces tens of thousands of dollars more in annual fees related to last year’s $34 million bond sale than anticipated.
The bonds were sold last May to finance three major county construction projects: the Concord water line, renovation and expansion of Concord Elementary School and the first phase to expand the Rustburg government complex.
County Administrator David Laurrell told the Board of Supervisors on Monday that Bank of America, which holds the loan guarantee agreement, was increasing fees by about $70,000 per year.
Because the county executed the sale just before the credit market meltdown, it was able to seal the deal at a low interest rate through a Virginia Municipal League/Virginia Association of Counties investment pool.
As part of that deal, the county also secured a letter of credit insurance with Bank of America — a guarantee that the bank will pay the debt if a bond seller defaults.
Sellers are charged an annual fee for that service — for Campbell County’s 20-year bond sale loan, that meant there were 20 annual agreements, said Alan Lane, county finance director.
“The expectations were that the annual fee that was quoted originally would be carried over year to year,” he said.
“We were not aware that they could (increase the fee,)” Lane said.
Laurrell said only two or three banks currently issue letters of credit insurance for municipal bonds; he anticipates that as more banks offer them, rates will decrease.
“Since this was written as a fixed loan, I think it’s a short-sighted move on their part with us because what we’ll do is either find a substitute letter of credit or refinance,” he said.
“So they’re going to lose the benefit in our paying interest over the long haul.”
In other news:
- Supervisors unanimously passed the fiscal year 2010 budget that includes no tax increases. Laurrell told the board that the county will need to remain vigilant about the possibility of receiving less state funding; if that happens, he said the first response will be to dip into the county savings, which has been growing for several years in anticipation of shortfalls.
- Supervisors also discussed whether the county should adopt an ordinance requiring dog owners in certain parts of the county to pick up their animal’s waste were it to fall on someone else’s property. The county has no power under state law to enforce that type of law and a majority of supervisors said they did not want to ask the General Assembly to examine the issue.
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