The Leesburg Town Council has given the green light to a recommendation by the town’s financial consultant to fund its Capital Asset Replacement Program using more than $13 million of general obligation bond funding.
David Rose, of Davenport & Company, the town’s financial consultant, explained to the council at its April 14 meeting that his recommendation was an effort to continue the goal of being “strategic, cost effective and streamlining the time and expense of [town] staff.” In this instance, Rose and finance staff took a look at the town’s Capital Asset Replacement or CARP Fund, an annual fund where monies are set aside to maintain or replace town infrastructure. A Request for Proposals was issued at the end of February for lending institutions to bid on packages to help finance the fund and, of the two bids received, Rose said he believed the one from Truist made the most sense for the town.
Truist would provide $13.45 million over the course of six years, from the current fiscal year through fiscal year 2027, to finance CARP projects.
“It does not require us to actually borrow that amount of money. We borrow what we need when we need it,” Rose emphasized. “That was one of the strong positives of Truist.”
The borrowing would be tied directly to the projects that would be funded by any bond draw, Rose explained. Fixed interest rates of 1.46% and 2.29% for five- and 10-year loans, respectively, would be available for the duration of the financing.
Among the benefits of the loan, in addition to the fixed interest rates, is that Leesburg would not be required to borrow a set amount and there are descending penalties for prepayment, he said.
“Prepayment flexibility is important. Five- and 10-year amortizing options are really important,” Rose said. “We can do whatever we want based on what you are actually borrowing for.”
Rose said the town’s AAA-credit rating helped attract the quality bids, but surmised that the low amount of bids received was due to banks being so busy assisting with small business funding programs in the wake of COVID-19.
The bond sale is expected to close in mid-May.