SPRINGFIELD — The Effingham County Industrial Development Authority (IDA) recorded the first assist in the history of a gymnasium that hasn’t been built yet.
During its Jan. 8 meeting, the IDA unanimously agreed to serve as a “conduit” for the Effingham County Board of Commissioners in the issuance of a $5 million bond that will be used to construct a gym at the Clarence E. Morgan Sports Complex. The move is expected to save Effingham County taxpayers about $200,000 in interest.
“The authority here is being used purely as a conduit so the obligation is really on the county to repay the debt through an intergovernmental lease,” said Savannah bond attorney John Pannell. “That’s how we structured this. Y’all are financing this on behalf of the county and then entering into a lease where the lease payments will then be sufficient to pay back the bond.”
First Tryon financial advisor Tom Woodward, on behalf of the Effingham County Board of Commissioners, sent out a Request for Proposal to approximately 20 banks seeking their terms, conditions and interest rate in providing financing for the gym.
"The transaction, as John mentioned, is $5 million and we were looking for a 15-year amortization," Woodward said. "A number of banks came back with that 15-year option and, looking at all the bids, the winning bank was Zions Bank. (The winner) was picked both on going out 15 years at an interested rate that is fixed at 2.16 percent that can’t change over the term of the bond.”
Woodward said the Zions Bank offer was also attractive because it included no penalties for prepayment.
“It’s a tremendous interest rate and there is great flexibility on the terms and conditions, again, going out 15 years,” he said.
IDA member Slade Helmly asked Pannell and Woodward to explain the benefits of the IDA obtaining the bond instead of the county. Pannell cited its “broad powers.”
“Legally, y’all have got the ability to do this under your constitutional act,” he said. “Obviously, the county has the ability to provide recreational facilities for the citizens and so, as long as both entities can provide that facility, y’all can enter into an intergovernmental agreement to provide that facility. That’s essentially the basis for this financing.
“It’s a revenue bond being issued by the (IDA) but the security behind it is an intergovernmental contract and that structure is prevalent in Georgia. You see it done all over the state.”
Pannell said the IDA previously helped the county refinance some water and sewer debt.
“To be honest with you, the majority of the projects you are probably familiar with in Georgia have been structured that way,” Pannell said. “It has been blessed by the Supreme Court going back to thee 1950s and the underwriting, financial community looks at it at almost as good as a general obligation bond because it is a ‘full faith and credit’ obligation under the intergovernmental contracts clause.”
Pannell said the financial path chosen is cheaper than obtaining a funds from the Association of County Commissioners Association.
“The negative on that is that it’s structured as a year-to-year lease and it’s just not as secure as an intergovernmental contract, and so you will typical be penalized in the financial markets,” he said. “... you would be unlikely to get the 2.16 rate. It would probably be three percent or higher just because of that annual appropriation risk.”
The 27,800 square feet gym, designed by Hussey Gay Bell, will feature a pair of full-sized basketball courts, bleachers, dressing rooms and a concession stand. It will be built so that offices and a community meeting space can be easily added later.
County Administrator Tim Callanan told the IDA that their move will help the gym get built quicker. It is expected to take about six months to construct.