Finance talks continue


This panoramic photo shows, from left, commissioners Kerry Steed, Pat Haley and Mike Curry, discussing financing scenarios with several county officials and Jason Phipps of Peoples Bank. The commissioners are exploring financing renovations to three county buildings, including the courthouse, to see if they can save money.

WILMINGTON — The Clinton County commissioners tasked a working group with further research into financing $5.2 million renovations for three county properties, including the courthouse.

Those renovations include extensive work to the Clinton County courthouse, the Clinton County Prosecutor’s Office and the Clinton County Veterans’ Service Commission’s office, as previously reported.

“It seems that we’re in a position where we can invest our dollars now at a higher interest rate than what we could borrow them for,” said Commissioner Kerry Steed. “We can (hopefully) reduce the overall expense to the county by offsetting the expenses with some income that’s made on the other side of the investments.”

“I’m not opposed to this, if the numbers add up,” said Commissioner Pat Haley, whom Steed said is concerned about keeping the county virtually debt-free.

Commissioner Mike Curry previously expressed concerns that making payments will reduce the investment capital available for investing, thus cutting into possible investment gains later.

Curry’s concern touches on the complexity of financing the renovations while investing elsewhere.

The county invests primarily in bonds that offer low interest rates to avoid risk. Paying for the renovations outright would reduce the county’s investment pool, and thus, its earnings.

Financing them saves that money, but incurs interest expenses. Additionally, as payments are made, the investment pool shrinks.

To make financing the project worthwhile, the interest earnings, after factoring in decreases over time to the investment pool, must outweigh interest expenses. If they do, the net gain represents a savings to the renovations project.

The commissioners are trying to determine if financing it would save money overall.

“I think that if we could explore the options that would provide the most upside to the county, I think we owe it to the taxpayers of the community,” Steed said.

In order to keep the timeline set by Perfection Group, which has been chosen to do the work, a decision needs to be made by September when Perfection Group would need payment beyond the down payment.

The commissioners have discussed several financing scenarios, and Wednesday appointed a working group to look into it more.

Clinton County Treasurer Jason Walt, Morgan Stanley’s Brian Andzik, Peoples Bank’s Jason Phipps, Clinton County Auditor Terry Habermehl and Chief Deputy Auditor Carol McFall will meet together, look into different financing scenarios and report back to the commissioners.

One of those scenarios, laid out by Steed, projected a net gain of $677,000 after 10 years.

The commissioners don’t have exact interest rates for either the earnings or the expenses side. Last week, Andzik told commissioners that 3 percent interest was possible on investment earnings.

“So that $4 million bill (after a 25 percent down payment) that we had for renovations really turns into about $3.3 million,” Steed said.

Steed said the payments for the renovations would come from future payments from Regional Care Hospital Partners for the sale of Clinton Memorial Hospital.

“So we’d be losing that interest earnings from that money,” said Walt. “That’s the other side of this.”

Steed said Walt was correct, but added that the interest would offset the payments. In the end, he said, $332,000 per year would need to be paid out. That’s money that wouldn’t be available to earn interest on.

“If our opportunity cost is 1.5 percent … that’s still less than what we’re earning,” Walt said. “Long term, we could still potentially come out ahead pretty nicely.”

Phipps added that additional costs would be incurred by a bond counsel and the bank’s fees. He estimated $35,000 to $40,000 in expenses there.

Phipps also said there are other Federal Deposit Insurance Corporation insured investment options with higher rates, too.

Phipps said bond rates change daily, and the county needs to know what interest rate it would incur by financing the renovations.

“I think we just need to come up with a return we need out of the investment,” said Walt. “If we can get that, we’re full steam ahead.”

Reach Nathan Kraatz at 937-382-2574, ext. 2510 or on Twitter @NathanKraatz.