BLYTHEWOOD – Council voted 5-0 last week to amend the last fiscal year’s budget (2017-18) to play catch-up on a $265,200 payment that should have been made to the debt service fund for the Blythewood Facilities Corporation (BFC) 2010 bonds prior to the recent refinancing of the bond.
Brent Robertson, representing Parker Poe, the Town’s bond attorney, explained why the amendment was needed.
“When the 2010 bonds were originally issued, certain funds and accounts were established that are customary with these types of bonds,” Robertson said. “One was a debt service reserve fund (DSRF) equal to one year’s worth of debt service. It served as additional security for bond holders. The second was a debt service fund (DSF), a budgeting instrument for the Town.”
Robertson explained that, according to the bond documents in the 2010 transaction, the Town was to deposit, on a regular basis, accommodation tax and hospitality fees to replace the security for the bonds.
“When it came time to refinance those bonds,” Robertson said, “both those funds, the DSRF (security to the bond holders) and the DSF (the budgeting instrument for the Town) were to contribute to the transaction, helping to reduce the amount of the borrowing.”
While Robertson said the DSRF was funded in 2010 and was actually sitting in an account with Regions bank, there were no funds sitting in the account for the DSF.
“It appears that, in the past, the Town put those funds into the account right before payments were due rather than making monthly or quarterly payments along the way. So, because there was not a regular deposit of those funds into the DSF over the period of time leading up to the refunding, you have to cut a check for it now.”
Robertson explained that the Town has not lost any money, but is having to deposit the entire sum of $265,200 into the account that should have already been there.
“If we had not refinanced the bond,” Mayor J. Michael Ross added, “we would have made that payment on Sept. 1 as we always have.”
“Had the bank been willing, we might could have rolled that $262,200 into the larger refinancing,” town attorney Jim Meggs explained further. “Essentially, we are slamming down the debt quicker by paying the $265,200 instead of building it into the financing.”
“I think our surprise was that in all the negotiations, we didn’t know [it had to be there.] You [Parker Poe] assumed the $265,200 was in the account,” Ross said. “So we have to go back and deposit this money and amend the budget for 2017-18.”
“You’re just playing catch up,” Robertson said.
To make the payment, town administrator Brian Cook explained from what funds the $265,200 would be disbursed to the BFC (escrow) account – $74,256 will come from the general fund, $55,692 will come from the local accommodation tax fund and $135,252 will come from the hospitality tax fund.
