The Flagler County Commission voted 5-0 this evening to approve a $20 million commercial loan with CenterState Bank to finance a 51,000-square-foot Sheriff’s Operations Center south of the Government Services Center in Bunnell.
A public groundbreaking at the sheriff’s project, some two and a half years after the law enforcement agency vacated its former operations center off State Road 100 in Bunnell, is scheduled for Wednesday at 9 a.m.
County commissioners had few questions for Jay Glover, the county’s financial adviser, who presented the CenterState proposal and revealed that–contrary to Administrator Jerry Cameron’s claim last week that the loan, which he called a bond, would be financed with local sales surtax revenue–there would not be one specific source of funding for the financing
“Obviously any time a lender is going to provide you $20 million-worth of financing, they’re going to do a great deal of due diligence on your ability to repay that debt,” Jay Glover, the and this loan is secured by what we call a covenant-to-budget and appropriated from legally available non-advalorem revenue [that is, property tax revenue], so we do not pledge a specific revenue stream. Instead, within each budget year, you identify any legally available source of non-advalorem revenue to make that payment. So ad-valorem taxes are in no way involved in this, because in the state of Florida, that requires a voter referendum in order to do so.”
Commission Chairman Donald O’Brien provided the only moment of clarity about the county’s actual debt-repayment abilities: “If I look at our Fund 212, looks like we’ve got approximately $6 million or so flowing into the fund,” he said, “just being general here, and you have about $3 million in debt service coming out of there, and this debt service, after the first couple of years, is about $1.6 million a year, approximately.” He asked the finance director if he was reading the figures correctly.
Finance Director John Brower could not answer. “I’m not 100 percent following what you’re saying,” Brower said, “we’ll set up a debt service fund for this, it will be transferred from general fund, using non-advalorem revenue.”
O’Brien tried to further clarify: “If I looked at the schedule that we have now, what we’re paying from that non-advalorem revenue, from our budget documents, again, it’s roughly $6 million, servicing about $3 million now, it’s like there’s about another $3 million” available. In other words, the county will be left with very little maneuvering rom with similar capital funding for many years into the future.
Including the financing of the loan, the county will owe close to $23 million, to be financed over 15 years. With financing, the county’s total debt load will rise to $165 million. The county currently has a credit rating of AA, which is considered very solid.
Glover said the interest rate on the loan was higher than some of the five other banks that placed a bid on the county’s loan. But in one case, Capital One required all the funds to be drawn down at closing. What CenterState did, he said, was allow drawing the funds through June 30 2022, with just a $250,000 draw at closing, and additional draws every three to four months, through June 2022, somewhat reducing the interest costs up front. The last $1 million doesn’t have to be drawn if the county doesn’t need it (an unlikely scenario, given the county’s history of profligate spending). “That’s why the recommendation is on the table here today,” Glover said.
If the county were to repay the whole sum in the first five years, it would pay a 1 percent penalty. From the fifth to the 10th year, it could repay without a penalty.
Commissioner Andy Dance asked about the county’s reserves. “Obviously that is the first line of defense amongst revenue downturns or things that might happen like Covid, or like a hurricane, or something especially for a coastal community,” Glover said. “So if I tell issuers anything to pay attention to and you’re going through your budget process and you’re making decisions, it is having those fund balance levels at or above your policy, it is the one thing that is most important.”
The evacuation was the result of dozens of employees reporting sicknesses usually associated with sick-building syndrome. Environmental analyses, including one by the Centers for Disease Control, found several issues with the building’s ventilation system, water intrusion especially at ground level, and bat droppings in the rafters, among other problems. The county sold the building at a loss earlier this year.
“This continues to be a very significant historical moment for our county to finally start the end of the game that started with our sheriff’s operations center,” Commissioner Dave Sullivan said this evening.
For more details, see “$21 Million Sheriff’s Building Would Be Financed With 15-Year CenterState Bank Loan at 1.83% Interest” and “$21 Million Flagler Sheriff’s Operations Center Unveiled, But Questions About Financing Remain Unanswered,” and see below.