Investors will get a return on average of 2.39 percent on the $54,695,000 in capital improvement bonds for road improvements Stephens Inc. sold Monday on the county's behalf.
The Little Rock investment bank received $382,865 for underwriting the sale, leaving $54,312,135 in bond proceeds for road improvements that will include $30 million to partner with the state in extending the King Expressway 5.16 miles from the Highway 70 east interchange to the junction of highways 5 and 7.
Voters approved the levying of a five-eighths cent sales tax to secure the bonds in a June 28 special election by a 4,608-2,639 margin. Taxpayers are projected to pay $59,810,112 in principal and interest during the life of the issue, said Jack Truemper, Stephens' senior vice president of public finance.
The bonds have a stated maturity of Nov. 1, 2024, but they're projected to pay off in May 2023. No bond proceeds went to the $2,734,750 needed for a debt service reserve fund, which guards against a decline in sales tax receipts that would prevent the county from paying its pledged obligations to bondholders.
Collections in excess of what is needed to pay bondholders semiannual interest and annual principal payments will go toward the reserve fund. The release last month of the $2.1 million reserve fund for the $41.2 million bond issue voters approved in October 2011 to build the Garland County Detention Center helped retire the bonds five months ahead of schedule.
The five-eighths cent sales tax securing that issue will cease at the end of the year, with collections of the five-eighths cent sales tax for road improvements beginning July 1.
Truemper said the May 1, 2023, projected payoff is based on zero-percent growth in sales tax collections. Remittances grew in each of the three full years the sales tax in support of the jail's construction has been collected, going from $10,314,556 in 2013 to $10,521,040 in 2014 and $10,919,904 last year. There has been $8,456,365 remitted through September of this year.
The early payoff leaves five months of collections that can be used for any legal county purpose, generating what could be more than $4 million in additional revenue for the county. State law doesn't allow the levy of a sales and use tax to end until the first day of the calendar quarter after 90 days from the date the Department of Finance and Administration receives the termination of tax certificate from the state treasure's office.
Truemper said Standard & Poor's rated the bonds A plus, the equivalent of the A1 rating Moody's gave the jail bonds. The bond proceeds include $483,364 set aside for capitalized interest, which will be used to pay bondholders semiannual interest payments until sales tax collections begin in July.
Unlike the jail bonds, interest payments on the road bonds won't be exempt from federal income taxes. It's uncertain when the road projects can be let for bids, making the bonds unable to meet the spending deadlines required for tax-exempt status. The interest payments are exempt from state income taxes, Truemper said.
The county can invest bond proceeds while the projects are being bid and organized. State law allows the proceeds to be invested in government-backed securities or federally insured demand deposits or certificates of deposit.
The bond offering's eight different maturities were all sold at par value, Truemper said. Some of the bonds for the jail were sold at a premium or a discount, allowing investors to receive higher semiannual interest payments or the difference between the par value and discount price when the bonds reach maturity.
The Garland County Quorum Court unanimously adopted an ordinance Monday authorizing the issue. The sale will close Dec. 1, with the proceeds being deposited with the county's trustee at Simmons First Trust Co.
Local on 10/26/2016