Park Finances The New Township Garage - No Bidding Required

Granville Township, without the benefit of competitive bidding, selected Park National Bank for the $750,000 bond issue to finance construction of the new township garage. Of Park, Norman Kennedy, the Township's Fiscal Officer, said, "We appreciated their interest in our bond issue and the local support."

According to Kennedy, Park National Bank "bid" 5.4% for the $750,000 bond issue with a term of 15 years and no prepayment penalty. [Click here, to view Kennedy's email]

The 5.4% interest rate is for the first five years of the bond. Thereafter, the rate adjusts at each 5-year anniversary.

By comparison, at its meeting on November 5, the Village Council, during discussion of a resolution to issue a $630,000 bond to pay for part of the cost of acquiring the Bryn Du Mansion, heard from Assistant Village Manager Roberts. She told the council that their resolution refers to a bond anticipation note for one year at a rate of about 4%. She indicated that last year's note was for 3.6%.

Bloomberg reports today the current rate at 3.16% on AAA bonds. Assuming Granville Township is AA level, then the yield would be about 3.3%.

The township can draw on the principal as money is needed to pay the contractor during the construction of the building.

The Granville Press asked Kennedy if there was an actual bid notice. Kennedy responded, "No bid notice required."

Kennedy explained, "We worked with Peck Shaffer as our bond counsel. They put us in contact with several entities they thought might be interested in purchasing tax exempt bonds from a local political subdivision."

However the potential bond buyers were sought, only Park was interested.

Kennedy blamed the lack of bidders for the bond on the current economic climate:

"If you will put yourself back in the time frame of late September and early October there was chaos in the financial markets. Banks were failing, banks were being rescued, interest rates were up and down, no one was lending, charge-offs were increasing, loan loss provisions were going through the roof, bank earnings were disappearing. Normally banks buy investment securities for their portfolios in order to acquire secure assets. Nobody was interested in buying out of area bond issues. Banks also acquire tax exempt bonds in order to shelter some of their income. The problem is without income there is nothing to shelter."

"We had one bidder, Park National. Park is our depository. Park also is not wrapped up in all of the problems that I described above. If you'll read its advertising Park is saying that it's business as usual. They have funds and want to make loans. This is true."

"During this period there was no active market for tax exempt securities, however our bond counsel felt the quoted rate of 5.4% for five years, was fair."

For the contacts and advice, bond counsel, Dennis Schwallie of Peck Shaffer will be paid approximately $4,500, including reimbursement, for out of pocket costs.

There have been no draws on the bond yet. Kennedy has requested a payment schedule from the contractor so that he can plan the bond draws.

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See previous stories about the new township garage: