The Daviess-DeKalb Regional Jail selected D.A. Davidson & Co. out of Kansas City as the firm to offer board members banking service as they seek to refinance the jail.
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The decision was made at a special meeting held June 15, at Pattonsburg.
Two finance institutions had presented modules to the board at earlier meetings. The other was Piper, Jaffray & Co. The bank which provided the original loan for the jail, Commerce Bank, withdrew from the presentations.
Interest rates were nearly the same for the two firms. Interest rate with D.A. Davidson should be locked in at between 1.9% to 2.5%.
D.A. Davidson offered an option to pay off the jail’s bond debt early and without penalty — the deciding factor for the board.
"Our goals is to do all we can do to pay off the bond debt as quickly as we can," said Daviess County Commissioner Randy Sims.
Charlie Zitnik, Senior Vice President, Public Finance Banker with D.A. Davidson, provided the board with a summary of its financial plan at Wednesday’s meeting.
The jail is presently financing $2.7 million in bond debt. In order to pay the bond off one year early — in June of 2015 — the jail will pay roughly $1 million from cash on hand toward the principal. The bond debt will then be reduced to about $1.7 million.
The jail will call upon three sources for that money.
One: The board will be able to apply $405,000 from the jail’s reserve account toward the principal. This ‘found’ money was set aside in an escrow account when the jail’s bond was initially financed as part of the requirements to get the loan. This "certificate of participation" refund could not be used until the midway point of the scheduled payments. That midway point has been reached and the money can now be applied toward the loan.
Two: A $500,000 CD will be cashed in. From that, around $300,000 will be used to pay off the principal. (The other $200,00 will be used for capital expenses for the operation of the jail.)
Three: This year’s scheduled payment is for $453,220 toward the principal.
The jail will still have a CD worth$900,000 in reserve; plus interest; plus the funds generated by the sales tax, which averages $60,000 to $65,000 per month.
There is no prepayment penalty with the D.A. Davidson plan.
The half cent sales tax generates about $780,000 every year. Eliminating those payments by paying off the bond a year early would mean significant savings to the tax payers in Daviess and DeKalb counties.