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County considers paying cash for new jail
by Joe Baker
Jul 18, 2013 | 1393 views | 0 0 comments | 28 28 recommendations | email to a friend | print
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County Commissioner James Rosales and County Judge Barbara Shaw discuss options for how to pay for the new county jail during the July 9 meeting of Commissioners Court.
Joe Baker photo County Commissioner James Rosales and County Judge Barbara Shaw discuss options for how to pay for the new county jail during the July 9 meeting of Commissioners Court.
slideshow
Joe Baker photo
Members of Commissioners Court, from left, Pete Jauer, James Rosales, Barbara Shaw, Shelby Dupnik and Tracey Schendel discuss the option of paying for the county jail project with cash reserves during the July 9 meeting.
Joe Baker photo Members of Commissioners Court, from left, Pete Jauer, James Rosales, Barbara Shaw, Shelby Dupnik and Tracey Schendel discuss the option of paying for the county jail project with cash reserves during the July 9 meeting.
slideshow
KARNES CITY – County officials weighed different options about how to pay for a new county jail and road projects during the July 9 meeting of Commissioners Court.

The item up for consideration was possible action regarding the sale of $8 million in bonds for the county jail project and $1 million in bonds for county road projects.

County Judge Barbara Shaw said she and County Commissioner Pete Jauer met with Bob Henderson, a consultant with RBC Capital Markets, to discuss the different options.

“He (Henderson) is not going to say that it is a bad idea to pay cash for the jail, and it wouldn’t be a bad idea to do the bonds for the jail,” Shaw said. “It is a flip of the coin proposition.”

Commissioner Jauer emphasized the need to keep adequate financial reserves on hand.

“We can invest this money in someplace besides the bank,” Jauer said. “We have to.”

Commissioner Tracey Schendel asked if interest earned on the investments would be greater than interest paid on the bonds needed to fund the jail construction and road projects.

“That’s what we all have to weight out,” Jauer said. “What the difference in that is going to be.”

County Auditor Lajuana Kasprzyk said that although the bonds may be issued as 30-year bonds, they can be paid off sooner, as soon as 10 years without penalty.

“I don’t recommend paying 100 percent of the jail out of our reserves,” Kasprzyk said.

Commissioner Shelby Dupnik asked Kasprzyk why that is her recommendation.

“Why? Because we don’t know what is going to happen in the future as far as our tax base and our tax collections as well as our tax rate,” Kasprzyk answered. “If we deplete our reserves we may be in a heck of a big heap of trouble trying to operate.”

Dupnik expressed interest in investing in the jail, itself.

“I just find it hard to believe that, for at least the jail, if it is $8 million, that we could not pay for that jail and relieve the taxpayers of a bigger burden down the road,” Dupnik said. “...that one time investment of paying for that jail and only that jail would maybe be to our advantage.”

Kasprzyk asked about the current projected cost of the jail.

“I know we are at $7 million,” Shaw said. “What do we have in the bank? 24?”

Shaw said the cost of issuing the bonds plus interest makes paying for the jail from reserve funds a more appealing option.

Kasprzyk said while there is $25 million in reserves “overall” there is only $17 million of reserves in the general fund.

“That’s what would be eligible for paying out,” Kasprzyk said. “Technically if you paid 100 percent for the jail out of our cash right now, you would be depleting us by fifty percent.”

Jauer said he didn’t think the county should pay that much of the reserves for the jail.

Schendel suggested paying half of the cost of the jail from reserve funds and sell bonds for the balance.

“I don’t want to put a 30-year burden on the future,” Shaw said, adding that a decision needs to be made regarding the bonds within the next two months.

Commissioner James Rosales said he respects the opinion of the county auditor, but agrees with Dupnik’s suggestion of paying for the jail with cash reserves on hand instead of borrowing the money via bonds.

“We haven’t had these kind of funds,” Rosales said. “We accumulated these funds – this revenue – pretty quick in a few years, and I just kind of thought that we could pay it off, at least one thing, and not have any more bills or put us into another note... The oil production is good right now, everything seems good. We may be able to rejuvenate that account back in the next year, two years, three years...I am not sure, but at least we would have one thing paid off.”

Dupnik compared issuing long term bonds to what’s been seen at the national level.

“I really don’t want to create a burden on the future,” Dupnik said.

The county auditor requested that the court take no action before she had a chance to talk with Henderson.

Shaw asked Kasprzyk to do that by the end of the month.

Dupnik requested for Henderson to come before the court to answer some of the questions.

Treasurer Vi Malone suggested forming an investment committee that could also meet with Henderson.

The court took no action on the item pending further consultation with the county’s financial consultant.
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