Fauquier County Volunteer Fire and Rescue Association

Long-term Financing

 

Bond Counsel’s Advice:

 

1.                  No legal issues with USDA

2.                  Moral Obligation – County commitment of future tax dollars

3.                  County should not “venture too far down the path” unless behind the project.

4.                  Establishes a precedent for same arrangement for other volunteer fire projects.

5.                  The current letter is open-ended – recommends the County to exercise caution.

 

Financial Advisor’s Advice:

 

  1. Since the activities are supported from property tax dollars, one could argue that ownership of the asset should reside at the County level.
  2. Since taxpayer dollars are used to purchase the assets there is an implied level of continued stewardship and maintenance of such property like any other County property.
  3. Purely from the financing side – more control over the operations, funding and financing of the F&RA is in the County’s best interests.
  4. Separate bidding of projects – removes any economies of scale from financing a number of projects at one time which can reduce overall borrowing costs.
  5. Recording of Assets – The debt will be included as County debt for financial reporting purposes.  Rating agencies will include the debt as County debt for debt ratios. 
  6. Recommend – The BOCS not execute the letter until they all of the facts relating to the financing (lender, term, rate, prepayment options, amount, etc.)
  7. Recommend – The BOCS not sign until F&RA provide evidence of a firm bid/offer of such financing so that the County may determine whether it wants to seek other financing at lower rates or better terms.
  8. Since these obligations are being repaid with County property tax dollars, the County has every right – and has the obligation – to ensure that such financing is on the most advantageous terms.
  9. If F&RA indicates that such a letter is required in order to receive a firm bid from a prospective lender then the letter should contain language that requires the F&RA to return to the Board for final approval once the terms and structure have been finalized.
  10. 40 year term – what is the useful life of the asset?
  11. How will repairs and maintenance be funded?
  12. USDA rates are taxable – County may get a better rate via a tax-exempt financing.
  13. USDA’s terms are typically non-negotiable.
  14. USDA may have the best financing vehicle – recommend – County gets a complete description of the terms of the transaction prior to executing the proposed letter.