The Liberty County Development Authority says taxpayers will not have to pay for its proposed wastewater treatment facility because developers and tenants will foot the bill. But the LCDA may ask the county Board of Commissioners to provide financial backup for a worst-case scenario.
At a special called meeting in Hinesville Tuesday, authority board members heard from a finance advisor about budgeting a package that banks would be interested in funding. The Liberty County Board of Commissioners will hear the same presentation at its work session Wednesday at 4:30 p.m.
Without that wastewater treatment plant, a massive mixed-use development of 5,400 homes and apartments and new businesses, slated near Islands Highway and I-95, would be impossible.
Developer connection fees and customer bill payments would cover the $32.5 million wastewater treatment plant. But the LCDA would need enough credit to start construction.
For large projects like this, big banks issue bonds on the public market. Investors lend their money to the bank by buying the bonds for a fixed period. During that time, the investors earn interest payments. When the project is done, the investors get back what they originally paid for the bond.
That means the banks would need to be certain that the authority could repay the money in a worst-case scenario – for example, if the developer of the new homes and shops, Laurel View Properties LLC, went out of business.
And it’s possible the LCDA will ask the Board of Commissioners to have its back.
Courtney Rogers, senior vice president of public finance with Davenport and Company, walked board members through the numbers, which he said were “conservative.” Rogers said his company advises local governments and authorities on how to finance debt but does not buy or sell the debt.
The development authority has signed a “Water and Wastewater Capacity Reservation and Service Agreement” with Laurel View, he said.
What’s next
After the remaining audits are done, the next step will be to review how much the authority charges customers for water and sewer. Right now, those rates are different for Tradeport East and West and for Midway Industrial Park.
Rogers said that revenue was “not going to carry us to the point we’re going to have enough revenues to use it to pay debt service. But we need to make sure the operations are covering operations. We want to make sure the fees that are being charged are actually paying for the services they’re going to get.”
And he pointed out that connection fees “have been going up, and this is an important revenue source, especially as we get into the agreement.”
The water/sewer budget only covers operations with no money left over, he said, while the general fund budget’s revenue comes from “the two mil ad valorem tax that’s required to be levied by the county,” as well as “charges for services from some of the industrial tenants, investments, earnings, and rental income.”
That revenue pays for the LCDA’s economic development work, as well as for a 2018 bond to build the Hugo Boss facility in Midway Industrial Park, and a 2019 bond used to refinance bonds issued in 2012 and 2014 “for the Tradeport East industrial project.”
Rogers said the LCDA would have to pass “what’s called an additional bonds test,” which would require the authority to show the bond market that it has a backup funding source in case of emergency.
Where does the money go?
The general fund brings in more than it’s spending but not enough revenue to cover debt service, he said. However, growth in Liberty County over the past five years means the tax digest is bigger. That, in turn, means more tax revenue: “The value of the two mils (property tax) have gone from $2.6 million back in fiscal year 2021 all the way up to $4.2 million in 2026.”
Under Georgia law, the LCDA gets a fixed two-mil property tax – $2 on every $1,000 of a property’s assessed value – to fund its budget.
According to Rogers, the maximum annual debt repayment the LCDA can handle on the wastewater treatment plant is about $2.2 million. A little more growth would provide a little more cushion, he said, “but right now, we’re projecting to be right about $2.2 million. So we do meet the test, but we’re just barely there.”
There’s also a Georgia Environmental Finance Authority loan with payments of about $120,000 per year for a water tank “that is hopefully paid out of the water and sewer debt,” he said. “Right now, it’s really being paid by the general fund.”
But by January 2036, the LCDA will have paid off “the original 2012 bonds that were financed again in 2019. That’s the bigger debt that goes away.”
For planning purposes, Rogers assumes the $32.5 million wastewater treatment plant would be financed by 5% tax-exempt bonds over 30 years.
Next, he explained, is an anticipated $2.2 million from the Laurel View development agreement.
The money comes from an initial reservation fee, payable in three installments starting August 1.
Those funds would go to pay for design, architectural, and engineering work that is happening now, he said.
Then there’s an annual reservation fee that the developer will have to pay, which is based on a minimum of 150 ERUs, or “equivalent residential units,” roughly a single family household’s wastewater use per year.
Laurel View Properties would pay the authority those fees to cover the wastewater plant’s construction costs. Once residents and businesses moved in, they would pay usage fees to cover the plant’s operation and maintenance. It’s possible that current users “may see an increase in usage rates, but they will not be assessed additional system connection fees,” the LCDA notes.
What happens if there’s a problem?
But what happens if the developer were to go out of business sometime in the next 10 years before the old bond is paid off?
“Would the county be willing to step in in case of an emergency to pay the debt service?” Rogers asked, adding that the county would get the benefits of new jobs, growth, and assessed values.
Otherwise, he said, the LCDA’s bond rating would suffer, meaning it would need a higher interest rate, “which means we may not be able to borrow enough to do the project.”
To make the banks happy, Rogers said, the authority should work out an agreement with the Liberty County Board of Commissioners to cover any difference in a worst-case scenario – something that attorney Kelly Davis, who represents both boards, said is “done all the time with other authorities in the county,” like the hospital authority or public facilities.”
Moving parts
Brynn Grant, the development authority’s CEO, pointed out that these financial scenarios did not include the revenue from connection fees and that the discussion was part of planning for any future emergency.
Board member Marcus Sack said, “If everything goes to plan, sounds like they’re going to be producing new customers at a pretty quick clip,” adding that it would take “about 300 new customers to cover that $360,000 shortfall….between that and the ten-year time it takes to get rid of all of that existing debt, seems like we’re in pretty good shape.”
After the meeting, Grant said the project has a lot of moving pieces that she’s trying to keep moving all at once and on schedule.
The LCDA has yet to receive a requested wastewater load allocation (WLA) from the Georgia Environmental Protection Division’s Watershed Protection Branch. That number tells the project engineers the maximum amount of treated freshwater that could be discharged into the North Newport River. Engineers need to know that number for calculations in deciding whether to send the wastewater there or to the Laurel View River, and for other calculations used to build the plant. That allocation likely won’t happen for a few more months, she said.
Then there are the last few audits still due after years of alleged accounting problems under former Chief Operating Officer Carmen Cole, who has pleaded not guilty to fraud charges stemming from her use of and accounting for LCDA funds.
Grant said the 2023 audit, which was due in August, will be presented in September. However, she added, she has made it clear to the auditing firm that the timeline for the remaining audits is unchanged. She said the 2024 audit should go more quickly because that was Director of Finance, Compliance and Administration Beth Hancock’s first year on the job. The 2025 audit, due in November, would bring the LCDA up to date.
Phase One of the wastewater plant should be online by the end of 2028, according to the April 27 agreement with Laurel View Properties.
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