Getting more for less – that is, more road resurfacing for less money – marks the major hope behind the financial juggling in the Putnam Board of Commissioners’ March 12 referendum seeking voter approval for a maximum $22-million sale of general obligation (G.O.) bonds.
“We are hoping we won’t have to borrow but $18- to $20 million,” Commission Chairman Bill Sharp said. “But you have to plan on a worst-case scenario.”
G.O. bonds, or so-called “municipal bonds,” have advantages over revenue bonds for both investors and the borrowing governmental entity. For investors, the income is tax-free, which translates into a lower interest rate. The borrower likes the lower interest rate. Getting the money up front also avoids future inflationary impacts.
State law requires G.O. bonds to be approved by voters through a potentially unpredictable referendum because the “good faith and credit” of the county government, i.e., its taxing powers, would back the G.O. bonds.
However, the commission and staff see collections from the T-SPLOST sales tax approved two years ago still paying off all the bonds over four years.
“We are not going to spend money we haven’t got,” Sharp insisted. “And we have got to be careful about messing with our fund balance. That’s for emergencies.” In other words, if the T-SPLOST collections and the project list do not match, it will be the project list that gets cut, and there will be no supplement from additional property taxes.
The overall costs could feasibly top $24.5 million, including $2.5 million in interest, bond attorneys, and a couple of financial consultants. However, the county already has that $2.5 million accounted for in the state’s annual Local Maintenance Infrastructure Grant (LMIG) of about $1 million and this year’s extra $1.4 million grant.
The point of all the maneuvering is to get the county in the best position to take advantage of having all the money upfront.
A long list of small county road projects can be enticing to a larger contractor seeing advantages in economies of scale and not having to set up equipment in different locations over years. Currently, more competition exists for larger projects, which can translate into lower costs for the county.
“There are just fewer contractors looking to do small projects,” Sharp pointed out.
The county-proposed project list features 124 items. Most – easily half – are less than a mile long, as in subdivision streets. The longest is Dennis Station Road at 7.9 miles and Pea Ridge Road at nine miles. The resurfacing of Pea Ridge Road was completed last year, but the inflated costs of $250,000 a mile kick-started the approach being taken this year.
The inflation of the last couple of years, plus the temporary presence of the E.R. Snell asphalt operation in the Rock Eagle Technology Park, plus timing, play major roles in the commission’s calculations.
“Of course, we still do not know what the contractors will do, and we do not know what the materials will do,” County Manager Paul Van Haute said. “That’s when it gets interesting.”