Bonds issue discussed, explained

By Amanda McBride
The Choctaw Plaindealer

Citizens concerned about the plan to restructure the county’s
hospital bonds filled the Choctaw County Board of Supervisors meeting
on March 28.

Bob Bagwell, who was on the agenda, asked several questions about the
supervisors’ plan to restructure the current $7.5 million revenue
bonds. He asked the board why a public hearing to restructure the
bonds was never held, why the bonds are $4 million more and how much
in savings they expect.

District 3 Supervisor Chris McIntire, also board president, deferred
the questions to Peyton Prospere, county bond attorney.

Through several discussions and heated arguments, Prospere explained
the difference between the 2011 revenue bonds and the current general
obligation (GO) bonds and information of why the county would like to
restructure the bonds.

He explained that the 2011 bonds were $13.5 million with 7 percent
interest for 18 years. The interest rate was figured based on
financial information submitted from Pioneer Health Systems, who
lease the county’s hospital and nursing home.

Also setup in the 2011 bonds, as Prospere explained, is an annual
requirement of $800,000 to a sinking fund that must be paid by the
county. He said this requirement was to help the county payoff the
bonds as quickly as possible.

Prospere said the county’s financial situation was compromised when
the coal fired power plant did not come off the fee in lieu payments
in 2012, as the county thought. He said this affected the county’s
ability to payoff the bonds early and referenced the $800,000 annual
payment to the sinking fund as a “straight jacket.”

Also, the county was required to make a bond and/or interest payment
in February 2013 of $151,000 that was not planned. The next bond
payment is approximately $900,000 and is due in August 2013.

McIntire said, in answering questions from Bagwell, that this August
payment is not in the budget and the county doesn’t have the money to
make this payment.

District 5 Supervisor Eric Chambers reminded the board that when they
worked on the Fiscal Year 2012-2012 budget, he told them bond
payments were due in 2013.

“When we worked on the budget for this year, I said we have payments
in February and August. I was told we didn’t. Later that year we
found out we did,” said Chambers.

McIntire responded, “I’m not pointing fingers. It was my belief and
other board members that we didn’t have any financial obligations
until 2014.”

Later in the meeting, McIntire said the county has $281,000 in change
orders to the new medical office building and $346,000 in change
orders at the new hospital that the county is required to pay to the
contractor.

In the same meeting, during the same agreements, Prospere explained
the restructured bonds.

The restructured bonds are general obligation bonds based on the good
faith of the county.

This is different from the 2011 revenue bonds that were based on
financials from Pioneer.
“If we go from revenue bonds to GO bonds it takes the skin out of the
game for Joe McNulty (CEO of Pioneer Health Systems),” said Chambers.

Prospere responded by saying that Pioneer has the same lease and
lease payments today as he did in 2011.

Prospere said the county has restructured the bonds as $17.5 million
general obligation or GO bonds for 16 years at a 3 percent interest
rate.

The GO bonds are $4 million more than the 2011 revenue bonds.
Prospere said this is because the county is required to pay four
years worth of interest payments for paying off the 2011 bonds early.

Prospere explained the primary benefits to the county to restructure
is saving $1 million in interest over the life of the bonds, two less
years on the bond life and no annual requirement to a sinking fund.

With the new bonds, there is a sinking fund but the supervisors are
not required to pay a specific amount to the fund. Prospere said the
amount paid to the sinking fund is “at the supervisors’ discretion.”

He also revealed that the bonds had been sold, the bond contract was
signed and that the closing date is April 12. McIntire said he signed
the bond contract late the day before, March 27.

After a surprised reaction from the room full of concerned citizens,
Prospere added that the resolution signed in January by the board
gave McIntire, as board president, authority to sign the bond contract.

Also, in those discussions, Chambers asked why a schedule of fees for
the new bonds was not included in the board’s minutes. He was told
fee schedules are not included in the resolution or minutes before
the bonds are sold. In this discussion, Prospere said $262,000 of the
total bonds was included in total professional fees, printing fees
and travel. He explained what each professional fees was and why.

John Jumper, the county’s financial advisor for the 2011 bonds, was
present at the meeting and asked several questions about the
restructured bonds. He also asked if other financial revenues were
considered such as a tax anticipation note and others. Prospere said
none of those alternatives would work for the county with their
financial situation.

Waverly King also joined the discussion and arguments over the bonds.
One of his main questions to the supervisors and to Prospere, was why
were GO bonds not recommended in 2011.

Prospere said in 2011 the county was not willing to do GO bonds but
the expiration of fee in lieu agreements changed.

King also asked why the supervisors are rushing to get the bonds
restructured. This question was also asked earlier in the meeting. He
asked the board to wait 30 days to allow him and others time to
review it.

“I’m not sure it’s a good thing,” said King about restructuring the
bonds. That’s when Prospere revealed that the bonds had been sold.

King continued asking questions about the bonds and said he is
concerned about the county’s debt.

“I’m concerned we are taking on more debt,” said King. “What if
Pioneer walks off and nobody wants the hospital. Then ad valorem goes
up,” he added.

McIntire said when the coal fired power plant’s fee in lieu ends next
year, the county will receive approximately $2.5 million (after the
school’s half) instead of the $1 million (after the school’s half)
the county receives now.

At the end of the discussion, the board recessed for lunch. No action
was taken on the bonds in this meeting.

None of the concerned citizens returned to the board meeting after
the lunch recess.