By Tracie Sullivan
Iron County Commissioners are one step closer to building a new jail after they unanimously passed a resolution on Monday outlining the parameters of an upcoming $95 million bond they plan to issue in the coming months.
Monday’s resolution follows last month’s approval of a 0.3% increase in the local sales tax. This tax hike will apply to all purchases except unprepared foods.
The decision to raise the sales tax came after a failed attempt last November to secure funding through a property tax increase.
This move was facilitated by the passing of House Bill 488 by state legislators, which permitted smaller counties to utilize sales tax revenues for public safety initiatives. As a result, the county now has the authority to proceed with bonding and repay the debt using the additional revenue generated from the sales tax increase, set to take effect on July 1.
The anticipated $4 million annual revenue from the sales tax increase will be earmarked specifically for the $95 million jail project. This decision was influenced by public feedback, which overwhelmingly favored a sales tax over a property tax increase as the preferred method for funding the project.
The resolution passed on Monday is the second phase of the bonding process and outlines the specifications of the upcoming bond. Under these parameters, the county can issue bonds up to $95 million, with an interest rate capped at 6.5% per year. Additionally, the bonds will be sold at no less than 98% of their total value.
The resolution also allows for the bond to be repaid over a maximum period of 40 years. However, Marcus Kelly, the municipal advisor for the county, explained to the commission on Monday that the interest rate the county secures will, in part, hinge on the length of the repayment period. Typically bonds are financed for 30 years.
“If you choose a repayment period of 25-30 years instead of 40 years, it will lower your interest rate,” he said. “The longer the repayment schedule, the higher the interest rate.”
Moreover, after several years, there’s potential for the county to refinance the bonds, opting for shorter repayment terms. This strategic move could result in further reductions in the interest rate, Kelly added.
Tom Coverick, a representative from Keybank, recommended the commission lock in on the interest rate before November, noting the historical trend of market fluctuations and instability following presidential elections.
“The market is very volatile in election years, particularly after the election, so getting things in place before then is very prudent,” he said.
Coverick also discussed current market conditions, pointing to indications from the Federal Reserve chairman that suggest interest rates are unlikely to be lowered in the near future.
Commissioner Paul Cozzens discussed the commission’s efforts from three years ago to identify a suitable site for the new jail amid favorable interest rates at the time. However, these efforts, he said, encountered opposition, with many residents alleging underhanded tactics by the commission.
“Had we secured a site sooner, the county could have saved approximately $30 million in reduced interest rates and construction costs,” Cozzens explained. “Unfortunately, opposition from those with ‘not in my backyard’ attitudes stopped us from doing that. They accused us of being nefarious.”
Next month, the commissioners will meet to vote on whether to proceed with the issuance of the bonds. Their decision will follow a public hearing scheduled for June 10 at 10 a.m. at the Parowan City Courthouse located at 68 South 100 East.
1 comment
Mary Edison
This article doesn’t mention that the county has owned land for the jail out 56 for the past 10 years but failed to build on that land. Imagine how much we could have saved by building while materials were much less expensive and while interest rates were at historic lows. Oops