County supervisors mulls bond issue for Prescott jail
PRESCOTT — Yavapai County could be poised — within the next four months , or so — to borrow upwards of $68 million to pay for a new jail in Prescott.
And if that occurs, initial site work could be underway at the chosen jail location along Prescott Lakes Parkway by about July 2020.
During a study session in Prescott on Wednesday, Nov. 6, the Yavapai County Board of Supervisors heard a report from Stifel Public Finance consultants about the process necessary for a bond issue to finance the estimated $68.5 million cost of a new 144-bed jail.
While the supervisors took no vote this week, a decision on whether to bring Stifel on board to handle the bond-issue underwriting process is expected to be on the board’s agenda for its meeting on Nov. 20.
Earlier this year, the county approved a property tax increase, with the intention of annually putting about $4 million of the additional revenue toward the cost of a new jail in Prescott.
This week’s presentation was the kick-off of the discussion on how to finance the cost of the jail to allow construction to begin in 2020.
Stifel consultants Grant Hamill and Randie Stein told the supervisors that the steadily increasing revenue through the existing one-quarter-cent jail sales tax (Jail District Excise Tax), combined with the county’s lack of any other outstanding bond debt, should make for a relatively low interest rate for the bond issue.
Hamill explained that the county’s credit rating would be determined by a number of factors, including the stability of the revenue source that will be obligated toward paying off the debt.
Central to the issue, he said: “What is pledged to the repayment of the debt?” Over the past decade, he said the county has seen “a nice, steady increase in excise taxes for the jail district.”
Presentation numbers showed that revenue from the county’s jail tax has risen consistently since 2011 when it totaled $5.85 million, through 2019, when it totaled $9.63 million.
“That, coupled with the fact that the county virtually has no debt outstanding makes for a very good story,” Hamill said. “We think that would lead to higher credit ratings, perhaps in the Double-A range.”
After the meeting, Hamill said the current interest-rate scenario for a county bond issue likely would be just over 1.5% in the beginning years of the bond yield curve, and about 3% in the final years of the 20-year bond.
But he and Stein emphasized that the numbers could change over the next several months, and they said Stifel would be keeping county officials apprised of changes in the bond market.
Land ownership history
County Administrator Phil Bourdon led off Wednesday’s discussion by explaining that the land along Prescott Lakes Parkway that will be used for the jail was initially eyed as a regional landfill.
“Back in 1991, Yavapai County and the City of Prescott entered an intergovernmental agreement to acquire this site” with the intention of building a landfill there, Bourdon said. But in the face of heightening environmental regulations, the county ultimately got out of the landfill business, Bourdon said.
Later, the county acquired full ownership of the Prescott Lakes Parkway parcel in a land exchange with the City of Prescott that put the Prescott Rodeo Grounds under city ownership.
All along, Bourdon said, the Prescott Lakes Parkway land was intended to be used for a government facility. “As we moved into the early 2000s, we started looking at this site as a criminal justice facility,” he said. The Yavapai County Juvenile Detention Center is located nearby.
After the supervisors decide whether to bring Stifel on board on Nov. 20, a decision is expected in December on the choice of an architect for the project. A construction manager at risk could also be chosen that month.
Although the exact amount of the bond issue is yet to be determined, Bourdon said the cost of the jail is projected at $68.5 million.
Stifel’s presentation included numbers for a $70 million bond issue, indicating that the estimated annual debt service (the amount the county would have to pay toward the bond each year) would be about $5.3 million.
Bourdon said the county likely would pay back the bond issue through a combination of property-tax revenue, jail sales tax revenue and general fund revenue.