MOUNT VERNON — The cost of paying off interest and principal on $1.5 million in municipal bonds tied to the Central School project will cost Knox County government $8,300 more per year by using an external loan through a bank, the Knox County Commissioners were informed Thursday. The other option previously under consideration — before the state informed county Auditor Jonette Curry it would be best to go in a different direction — would have been to proceed with an internal loan borrowed against the county’s general fund.
Another breakdown of the process involved with the $1.5 million in bond financing was provided Thursday to commissioners by County Administrator Jason Booth. He said the annual payment on the bonds will be $173,633 instead of a $165,000 annual payment had the county gone with general fund-backed bonds, a difference of about $8,300. The municipal bonds have a 10-year payoff period and will involve a negotiated sale through First Knox National Bank.
The commissioners voted to approve the issuance and sale of the bond notes.
The $4 million Central School project is currently underway by contractor Modern Builders of Mount Vernon. The project will repurpose the building to house the county board of elections on the lower floor and the county Veterans Service office on the main floor, with the two entities sharing the second floor. The project will also feature an external elevator behind the building within its large parking area.
The county will close on the bonds by Aug. 19, with all transactions handled by its bond counsel, Squire Patton Boggs LLP of Columbus, which will work with First Knox. The interest will be 2.75 percent annually instead of the 1.8 percent it would have been with an internal loan.
Commissioners, however, liked the flexibility of the bonds, which are “callable,” meaning they can be paid off earlier than their maturity date in 2029.
“If we pay it off in five years instead of 10 we actually save money,” Collier said.
Booth said the bonds will be paid back through the county’s general fund. The county already funds projects such as the Knox County Sheriff’s Office building through payments made through the general fund that had involved bond financing. The county is anticipating savings through such projects as energy efficiency at the county jail, money saved that can be applied toward paying off the Central School bonds in five years.
“That’s the goal,” Booth said.
The county will pay Modern Builders from its bond revenue as the multi-phase project proceeds, Booth said. Commissioners will vote on expenditures separately as they come in.
Ariel Corp. is contributing $2 million toward the project.