Central Yavapai Fire District board to refinance bonds
The Central Yavapai Fire District (CYFD) board is moving forward with refinancing the agency’s bonds.
The 10-year interest rate CYFD was paying on $3.75 million in bonds was at 4 percent and was gradually going to hike up to 4.5 percent by the end of the 10 years.
In March, Stifel, a financial services holding company, estimates it could bring that percentage down to about 3.1 percent (including the cost of its services) by propositioning other banks to take on the bonds at a lower interest rate.
During its May meeting, Stifel came back with a number of bank propositions. The best came from Northern Bank of Arizona, which offered a 3.06 percent interest on the 10-year life of the bonds. The deal also included no prepayment penalty, which means the district could refinance without penalty if the economy has another downturn and bond rates were low again.
“In the bond refunding market, that is unheard of because most banks want some guarantee of some rate of return for their investment,” Tharp said.
After brief discussion, the board decided to take the deal. The refinancing will save the district’s taxpayers more than $200,000 over the life of the bonds, Tharp said.
While the refinancing at least met the board’s expectations, there was clear indication on Stifel’s report that some banks decided not to bid on the process because of existing feuds between CYFD board members.
Specifically, both BBVA Compass and JP Morgan Chase referenced this reason for their non-participation.
“The primary reason is our concern related to the Intra Board Dispute that without final non-appealable resolution, there remains a great deal of uncertainty,” representatives of JP Morgan Chase stated to Stifel.
BBVA Compass was even more specific.
“Unfortunately the firm that we would engage as Bank’s counsel is expressing some real concern with regards to the legal issues related to the District and the two board members that are challenging the creation of the Authority and the legality of some of the Board’s decision-making,” representative of BBVA Compass stated to Stifel.
Though BBVA Compass did not specify which two board members it is talking about, CAFMA Fire Chief Scott Frietag said it’s clearly in reference to ViciLee Jacobs and Tom Steele, both of whom have repeatedly voiced their concerns regarding the way CAFMA is structured and how it operates.
In fact, for the last several months, both board members have voted against transferring monthly operational funds from CYFD to CAFMA — as is procedural and required for the authority to continue operation. Despite Jacobs and Steele’s opposition to CAFMA, the other three CYFD board members have continued to approve the transfers by a majority vote, thus keeping CAFMA operational.
Had this “Intra Board Dispute” not existed, Freitag believes a bank as large as JP Morgan Chase might have bid an even better offer than Northern Bank of Arizona.
“What could we have been at with an interest rate below 3 percent and how much more would that have saved overall with the remaining life of this bond repayment?” Freitag said.