Jefferson County Commissioners took their latest step away from bankruptcy Thursday as they refinanced about $138 million in debt at lower interest rates, a move that saves the county $14.24 million over the next eight years.
In requesting a resolution to refinance the general obligation warrants, Chief Financial Officer John Henry said the county has raised its credit rating with national finance agencies which translates to lower debt service on money it borrows.
Commissioner David Carrington said that the warrants were refinanced without extending the length or amount of the debt.
“Not one single day was added to the debt,” he said. “… We’re paying off the debt in 2026. There will be no more general obligation debt of the county unless a future commission decides, for instance, that they want to build a jail, which is probably coming in the next decade or two.”
Carrington said Jefferson County benefited from the principle of supply and demand.
“When the demand is greater than the supply, the price goes down,” he said. “Well the demand for our debt yesterday was about six-times more than what we had to offer, 5.8 if I recall right. (That) meant that the interest rate was able to move down.
“This is the final piece of restoring our financial (position) in the county,” Carrington continued. “It will be for these … four and future commissioners to keep that legacy up and not get back in the ditch that we were in eight years ago.”
Commissioners noted that the debt is now at a fixed rate of interest, a change from when the county exited bankruptcy on Dec. 12, 2013. Then, 92 percent of the debt was borrowed with variable interest and at auction rate, Carrington said. “That was going to be disastrous for us,” he said.
Jefferson County’s improving credit rating set conditions for Thursday’s refinancing. Its rating was upgraded two notches by Fitch Ratings to double-A minus, based on, among other factors, the county’s increased reserves. The county’s rating issued by Moody’s Investors Service remains A3, the same as its 2017 rating on Limited Obligation Warrants. In 2017, the county received a multi-notch upgrade by Moody’s and also an inaugural general-obligation rating from Standard & Poor’s of double-A minus. S&P cited the county’s strong management with good financial policies and practices, strong economy, and very strong available cash reserves.
“The county is in great financial strength as compared to where we were a couple of years ago, exiting bankruptcy on Dec. 12, 2013,” CFO Henry said. “Because of the financial strength of the county, we were able to refund (refinance) a balance of about $54 million of Public Building Authority warrants that were rated below investment grade and roll that into being investment grade.” The $54 million was a lease agreement from the construction of the new Bessemer Courthouse that was built 10 years ago. That is the remaining debt on that building, and rolling it into the other debt allowed it to be financed at a better rate.
The county looked to sell $138 million of debt Wednesday. Overall, the county received $809 million in orders for the warrants from various types of investors, including retail investors, separately managed accounts, institutional money managers, bond funds, insurance companies and hedge funds.
The County sold two series of warrants: The Series 2018-A warrants carried a true interest cost of 2.60 percent and the Series 2018-B warrants carried a true interest cost of 2.49 percent. The strong demand allowed the county to lower the true interest cost on the combined 2018 warrants to 2.59 percent during the pricing period.
Eight years ago, it was crying time,” Commission President Pro Tem Sandra Little Brown said. “Today, it is rejoicing time and it is laughter time for Jefferson County. I say well done because we’ve done our job.” Brown signed the warrant-refinancing authorization because Commission President Jimmie Stephens was absent from the meeting.
“The best thing,” Commissioner George Bowman said, “is it’s all on our watch. We inherited and we fixed it, all on our watch.”