Board approves $11 million bond
issuance for Logan County Courthouse restoration
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[July 26, 2020]
At the Logan County Board’s Regular meeting on Tuesday, July 21, the
board unanimously approved the issuance of bonds for the courthouse
Board members present were David Blankenship, Emily Davenport, Janet
Estill, Bob Farmer, Cameron Halpin, David Hepler, Steve Jenness,
Chuck Ruben, Bob Sanders, Scott Schaffenacker and Jim Wessbecher.
Annette Welch was absent
Finance Committee Chairman Chuck Ruben motioned to approve an
ordinance providing for the issuance of bonds.
As spelled out in the ordinance:
- [These bonds are  Taxable General Obligation Bonds (Courthouse
Public Facility Sales Tax Alternate Revenue Source), Series 2020A,
and  General Obligation Bonds (Courthouse Public Facility Sales
Tax Alternate Revenue Source), Series 2020B.
- [The bonds are] for the purpose of financing the costs of
repairing and restoring the county courthouse and for the levy of a
direct annual tax sufficient to pay the principal and interest on
said bonds if the pledged revenues are insufficient to make such
payments, and authorizing the sale of said bonds to the purchasers
Ruben asked David Pistorius to explain the details of the ordinance.
Pistorius is Senior Vice President at First Midstate, an investment
banking firm in Bloomington that specializes in municipal bond
The bond ordinance itself is about forty pages, so Pistorius shared
a summary of it.
Pistorius said the ordinance issuing the bonds is the final step in
the bond process.
After the process of going through the feasibility, Pistorius said
the company was able to issue $11 million in bonds. At the beginning
of the process, Pistorius said they were not sure the county would
be able to get that amount.
The county will receive $11 million in bond proceeds for the
courthouse renovation project.
The Bond issue was divided into two series, A and B, which have
different maturity schedules. When bonds over $10 M are issued,
Pistorius said they become non-bank qualified, which he called a key
One of the things Pistorius’ company tried to figure out in the
whole process is how to get the best execution in the sale for the
With bank qualification, Pistorius said interest rates are higher.
If a bond is non-bank qualified, it throws out some tax advantages
for banking institutions to purchase bonds.
Based on current market conditions, Pistorius said the company set
up the taxable bond for the first five years. Doing that will save
the county some of the issuance costs and be at a lower interest
The amount for the series A bond is $1,885,000. These are the
taxable alternate revenue bonds. With interest rates being at record
lows, these bonds came in at a little over 2.8 percent.
These bonds go out five years and then they will pay off. This
series is not “callable,” so Pistorius said it cannot be prepaid.
The rate is locked in for those years.
The remaining amount for the series B bond is $9,115,000. Pistorius
said this amount is the tax-exempt alternate revenue bonds.
Because there is a twenty-year sunset clause on the tax being
implemented, the revenue stream will end on June 20, 2040. Pistorius
said the interest rate for the series B bonds is 3.167 percent.
Pistorius said these [tax-exempt alternate revenue] bonds are
callable in five years. That would be 2026 and beyond. Pistorius
said chances are the county will not be able to get a better
interest rate if they call them in to refinance them.
These bonds cannot be extended out because of the 20-year sunset
provision. However, Pistorius said the county would only be
utilizing 80 percent of the revenue generated with this new tax. The
other 20 percent coming may be saved, used for facility improvements
or used to pay some of the bonds off.
First Midstate will wire the funds to the county on August 12.
In the first year of the bond issue, Pistorius said a payment is due
by November 1, 2020. The A series side shows an amount of $12,409.58
The B series side shows $64,212. The second amount is the interest
accumulated on the $11 M between now and November 1.
Midstate sold the bonds at a premium. Pistorius said that created
capitalized interest. The capitalized interest is added to the total
cost of the assets, so this interest is not recognized in the
current period as an expense.
The first payment will be made by Midstate with the sale of the
bonds and money wired to the county. Both the $12,409.58 and $64,212
will come to the county on the day of closing. Pistorius said this
money will need to be put in a bond and interest fund that needs to
be created. The county must park money in this fund to pay the bonds
off as principal and interest payments come due.
The Public Facilities Sales Tax started July 1. Pistorius said the
county should get the first check from that sometime in September.
At that point, Pistorius said the county should take 80 percent of
that check and put it in a bond and interest fund. He said the other
20 percent could be put in a project fund or saved to pay towards
The ordinance asks the county to take the 80 percent to cover the
debt service. Pistorius said that way, when the payments come due,
the money is in the fund for making the payments and not have to be
Real estate taxes act as a backup to the pledged revenue. Therefore,
Pistorius said every November or December, the county should do an
abatement ordinance to abate that levy.
Pistorius said total interest for the bonds together is 3.14
The Feasibility Report was paid for out of county funds and will be
on file in the County Clerk’s office. Pistorius said the city [of
Lincoln] and the county were both analyzed.
Covid was considered as a factor affecting sales, hotel receipts and
other things going on.
Pistorius said for the first year the revenue projection is a 30
percent reduction in sales tax.
The second year sales tax to would be reduced by 15 percent.
The third year sales tax would be the average of five years of
public safety tax.
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The fourth year, the tax would be the average of ten years of public safety tax.
After that, the amount is one percent.
Since only 80 percent of the new tax will be used towards the bond, Pistorius
said the additional 20 percent can be used to tackle courthouse projects or
saved to knock some bonds off.
Standard and Poor’s [a credit rating agency] gave the county an A+ stable
rating, which Pistorius said is good. One negative Pistorius said Standard and
Poor’s noted is a significant drop in the county’s population over the last few
Overall, Pistorius said Standard and Poor’s talked about the county having good
financials, positive reserves and positive access to funding. The county could
borrow if needed from a line of credit. These items helped lead to the A+ stable
Standard and Poor’s looks at these ratings yearly and could raise or lower the
ratings at some point. Pistorius said that is why it is good to keep good
financials going as the county moves forward.
With the issuance of over $10 M in bonds, Pistorius said the county will have to
file an annual continuing disclosure undertaking. As long as the county remains
First Midstate’s client, Pistorius said they will file the disclosure for the
county at no cost.
The county must provide current financial data to a secondary marketplace in
Washington D.C. called the Electronic Municipal Market Access (EMMA). Pistorius
said the county can be penalized if they do not do that.
If the county is late on a payment or there is a material event that takes place
regarding the ratings, Pistorius said his company needs to know about it. If
there is a drop in the rating or something that impacts the bonds, Pistorius
said it must be reported to his company because it needs to be reported to EMMA
as soon as possible.
In their annual letter, Pistorius said First Midstate tries to identify various
events to keep the county thinking about what might occur.
Pistorius will fill out the tax form after talking to people during the
construction. The IRS says the county has up to three years to spend the money
and have the tax advantage. After three years, if the county has not spent all
the bond proceeds, they become yield restricted. That means the investments
would be restricted to certain funds.
During the restoration, Pistorius will be checking periodically to see how the
project is going and how the money is holding up.
If the bond is not all spent within three years, Pistorius said it is not the
end of the world. He said his company and the county will just need to make some
adjustments. The bond attorneys will guide them through that process if there is
money left over.
Everything is spelled out in the forty-page bond ordinance Pistorius referred
After his presentation, Pistorius asked if there were any questions.
Ruben asked Pistorius to go over the divisions of the bonds with [Logan County]
Treasurer Penny Thomas. He asked if the county could put the $11 M on interest
at the bank.
Pistorius said he would do that and would provide a closing memo with wiring
instructions for the bond. He said the county could earn as much money as
If Bill Walter could give the county some kind of timeline on spending the
money, Ruben said that would help the county plan out the funding better.
That information would help Pistorius with the tax forms he has to fill out on
the spend down and proceeds as well.
Since the county has old bonds with interest rates between 6.5 and 6.75 percent,
Ruben asked if they could be paid off with some of the money. Then they could
funnel the money going to pay those funds back into this fund. Ruben said they
would end up in the same place
The county has two outstanding debts. One is a debt certificate that the county
funds at about $50,000 annually. Pistorius said it just has a couple more years
left on it.
The other is a $600,000 Alternate Revenue Bond for a court case the county
needed to fund. Pistorius said it was issued in 2012. Unfortunately, Pistorius
said he looked the bond up and it is not callable for two more years. This bond
must go until the call date. He said the county is paying 6.25 percent on both
this year’s and next year’s principal amount.
Back in the time the bond was done, it had to be taxable and bonds are priced to
the call date. Pistorius said the premium for the cost of issuance creates that
higher interest rate on top of the regular interest rate. The expense is paid
back within the first 10 years on those bonds, which Pistorius said is why the
rate seems high
Pistorius said the taxable rate at the time the bond was issued was probably in
the high fours or low fives, so it ended up being one percent higher.
During that time, Ruben said interest rates were climbing too.
One conversation Pistorius had with the county about the existing debt was
whether there is a way to restructure it. Doing that would bring more money in,
and Pistorius said it would keep payments basically the same.
The debt certificate is callable on any interest due date and Pistorius said the
next one is November 1. Pistorius said it could be refinanced. The county could
then bring in an additional $633,000 in new money to go towards the project.
Ruben asked whether the county could pay off the debt certificate. That way, the
county could take the $50,000 it is paying each year and have that money to put
into the bond and interest fund. Ruben said they would also save some interest
Pistorius thought that would work since the debt certificate would be callable.
He thinks there is about $169,000 left in payments on the debt certificate.
Over the time Pistorius worked on the bond, he said it had been a pleasure
working with so many people in the county and getting to know them. Pistorius
wished the county well on the project and asked board members to call with any
Ruben thanked Pistorius for leading the board by the hand through this project.
The board also approved Ruben’s motion for a resolution creating new fund line
items for the bond and expenditures for courthouse restoration. Ruben said these
funds would go in the Composite Account for Fiscal Year 2020.