During Covington City Council’s work session that was held Tuesday, Steve Mulroy served as guest presenter and discussed the partnership his company has with Covington and the ongoing projects of working on the Peters Mountain Landfill and a joint communications system with Alleghany County.
Mulroy is the managing director of the Virginia Municipal League/Virginia Association of Counties Finance.
To begin his presentation, Mulroy highlighted the current partnership VML/ VACo Finance has with Covington.
Mulroy highlighted three occurrences in which the two parties worked together.
The first collaboration saw a $653,685 equipment lease purchase that took place in 2015 where financial software, a garbage truck, a fire truck and a mini-excavator were purchased.
The second collaboration saw the city get a $2,410,000 general obligation refunding bond in 2015.
This was a refunding of a $3,282,000 general obligation refunding bond from 2005.
This bond was financed at 13 years at a rate of 2.47 percent.
It had $189,680 net present value savings, which equals 8.10 percent of refunded par.
The final collaboration spanned from November 2015-November 2016 and it was a municipal advisory engagement that was a refunding of $11,490,000 IDA of Covington-Alleghany County Lease Revenue Bond from 2007.
The $5,822,500 was from a literary fund bond, Edgemont Primary School, the same amount came from another literary fund bond from Jeter-Watson Intermediate School.
A liquidation of a 2007 debt service reserve account also took place.
Mulroy then took a few moments to explain what VML/VACo Finance is and what it does.
It was established by the Virginia Municipal League and Virginia Association of Counties in 2003 and it is a 501(c)(4) corporation.
The board of directors are comprised of local government officials (managers and finance directors).
Services are offered to local governments in three areas: government financing ($950,000,000), investment management ($1,900,000,000) and municipal advisory services.
The financing process was then explained by Mulroy and it begins with an RFP that is issued for each loan to national, regional and community banks to identify the best rates and terms.
Mulroy emphasized that any bank of local interest would be included in that search. The loan is then structured to suit a locality’s requirements.
The results of each bid is then presented to a locality for consideration.
The next step in the process is coordination of the work of bond counsel, bank counsel and bank and review loan documents.
VML/VACo Finance then conducts the closing to ensure a smooth process.
The final step in the financing process is one for bank loans.
The company provides ongoing support after closing, including monitoring arbitrage compliance upon request.
After explaining the relationship of the company and Covington, Mulroy then provided a breakdown of current projects, mainly the Peters Mountain Landfill.
The first part of the breakdown was in relation to a general obligation bond for the construction of Cell C at Peters Mountain Landfill.
The work includes, but is not limited to earthwork, erosion and sediment control, soil liner replacement, geosynthetics and leachate collection system and protective cover. The general obligation bond to finance the landfill contstruction will be financed at 2.28 percent for 10 years, maturing Aug. 1, 2027 and will close no later than Oct. 16, 2017.
The winning proposal for this bond was submitted by BB&T.
The par amount for the bond is $2,380,000, the bond has an average annual debt service of $266,153 and is callable without penalty after five years.
The equipment lease will cover the purchase of landfill equipment which includes a compacter, track loader, excavator, articulated truck, scales and a pick-up truck.
The lease will also cover the purchase of an emergency communications system in conjuction with Alleghany County.
For the equipment lease, Bank of America submitted the winning proposal and will finance the lease at 2.17 percent for 10 years with a maturation date of Aug. 1, 2027.
The lease can close no later than Oct. 23, but Mulroy feels closing will happen before that date.
The lease has a par amount of $3,066,560, an average annual debt service of $344,433.05 and is callable without penalty after five years.
Covington City Manager Richard Douglas said of the financing that he feels very confident that the funding will be available to pay for the debt services for the upcoming projects for Covington.