Commissioners hire bond counsel, financial advisor for annex project funding

Gonzales County commissioners voted unanimously Monday, Feb. 10, to approve contingent fee professional services contracts with an Austin law firm for bond counsel services and a Houston global investment services company for financial advisory services in regards to a potential $11.5 million renovation of the Gonzales County Annex building.

The county would only pay Bickerstaff Heath Delgado Acosta LLP (BHDA) if the firm provides “necessary legal services as bond counsel in connection with the authorization, issuance, and delivery of” either certificates of obligation (COs) or general obligation bonds, the latter of which requires voter approval during an election.

Attorneys from BHDA would prepare all necessary documents for the obligations, including the election call if the county decides to issue general obligation bonds. They would also be responsible for submitting bond transcripts to the Texas Attorney General’s office for approval.

In return the county would have to pay the law firm $13,000 for the first $1 million in obligations and an additional $1 for each additional $1,000 in obligations above that $1 million. For an $11.5 million bond issuance, the county would pay BHDA a total of $23,500, which would be taken from the top of any bond proceeds during closing.

Meanwhile, the county would only pay RBC Capital Markets for financial advisory services if it has a successful issuance of either COs or general obligation bonds. The county would be required to pay RBC Capital Markets a base fee of $41,500 plus 85 cents per $1,000 for all obligations over $10,000,000 for a total fee of $42,775.

Commissioners discussed the possibility of either calling a bond election or issuing COs or tax notes, neither of which require voter approval, to fund the renovation of the annex during their Jan. 27 meeting. Tax notes are generally only allowed for up to seven years and if the county were to issue the full $11.5 million as tax notes, it would add about 2.8 cents to the tax rate each year for debt service, according to Chris Allen with RBC Capital Markets.

If the county were to issue COs at either 15 or 25 years amortization, the tax rate would be increased by between 1.1 to 1.5 cents for debt service, assuming current interest rates and a conservative amount of growth in the county’s tax base, Allen said.

Tax notes cost less over the life of the note because they are amortized for a shorter amount of time, but  result in a larger increase in the tax rate since they must be paid in a shorter term than COs or general obligation bonds. However, they also require less in the way of advertising through public notices and would be less likely to jeopardize the county’s attempt to complete financing and construction of the annex project before the county would need to vacate the Courthouse should it successfully get a grant from the Texas Historical Commission to renovate the nearly 130-year-old historic structure.

If the county chooses to go with a CO, it has to post a description of the project to be financed in the Inquirer at least twice with the first coming more than 30 days before the commissioners court would vote on the CO issuance and the second a week after the initial posting. However, unlike a bond election, the COs would not require voter approval unless at least five percent of qualified voters in the county petitioned for one.

While a tax note is limited to just seven years for repayment, COs and general obligation bonds can be issued with maturity extending up to 40 years past the date of issuance, which allows the county to spread out the impact the debt would have on the tax rate.