COVINGTON - Tough bond market conditions have hit home for Newton County.
Commissioners agreed Tuesday night to restructure revenue bonds issued for Stanton Springs due to financial troubles of the insurance policy provider. The move was necessary to lower interest rates and save taxpayers money, according to James Griffin, a lawyer in the County Attorney's Office.
The Joint Development Authority of Jasper, Morgan, Newton and Walton counties issued $9 million in bonds for the 1,500-acre industrial park in 1999.
The bonds are variable rate demand bonds, meaning the interest rate is reset weekly and bond holders can tender bonds back for purchase each week for any reason.
Principal and interest on the bonds is secured by the tax digests of each county and by a bond insurance policy provided by Ambac Assurance Corporation, one of the largest bond insurers in the world, Griffin said.
In the midst of the economic crisis, Ambac lost its triple-A credit rating, which affects marketability. Existing bondholders have opted to tender the bonds for purchase, but potential investors have dried up.
At this point, Wachovia Bank has stepped in to purchase the bonds under a liquidity facility, transforming them into bank bonds, which bring a higher interest rate and higher fees.
According to Griffin, the interest rate has more than doubled from about 3 percent to 7 percent, and principal payments this year increased from about $400,000 to more than $600,000.
"What I've seen is how the Wall Street impact has affected people like us who haven't done anything wrong," Griffin said, noting that the counties involved are all fiscally sound.
The JDA has proposed terminating the policy with Ambac and replacing the liquidity facility with a direct letter of credit from Bank of America in hopes of returning interest rates to normal.
District 1 Commissioner Mort Ewing, a member of the JDA, said the board has looked at numerous options since February.
"What we have come up with is the best option that we have to get that interest back at the 3 percent rate," he said.
Ewing added that there were 15 triple-A rated bond insurers as of Jan. 1, and now, that number has dwindled to three.
Commissioners passed a resolution authorizing Chairman Aaron Varner to sign an intergovernmental agreement to substitute the letter of credit for the liquidity facility.
Walton and Morgan counties are expected to take up the matter within the next week or so, Griffin said.
It could be January before Jasper County approves the measure, however, he said, noting that, "The current board has been so difficult in so many aspects."
Jasper County commissioners have repeatedly tried to pull out of the JDA, saying they have not seen a return on their investment. Currently, there are no tenants in the park, but utilities and a parkway have been installed.
It may be necessary to wait until the new board members take office to get a majority vote, Griffin said.
"At this point, we believe Jasper County is on board. We wish they would get on board this month instead of next month, but we can't control that," he said.
Under an intergovernmental agreement, Newton and Walton counties each pay 37.5 percent of debt service and fees; with Morgan County paying 15 percent and Jasper County paying 10 percent.
Crystal Tatum can be reached at firstname.lastname@example.org.