Pike County supervisors met with financial advisers Monday in what officials described as the initial step of determining whether the county will be able to afford to build a new jail.
“We’ve been considering a new jail for months now,” board president Jake Gazzo said. “We’ve had conversations with contractors. This is the first step, to see if you’ve got enough money to do it.”
The jail was designed to hold about 140 inmates but is routinely overcrowded, and 30 years of hard use has raised questions about the long-term viability of the facility.
Stephen O’Mara, Jason Thomas and Jeffery Nicholson of Municipal Advisors of Mississippi told supervisors Monday that the county has two options to pay for an estimated $30 million jail — finance it through general obligation bonds or enter into a lease-purchase agreement.
Municipal Advisors of Mississippi wants to review the county’s finances and determine which option, if either, is best.
“That’s our concern now — what we can afford,” Supervisor Sam Hall said.
If hired, the firm’s compensation, along with other professionals including legal services and trustees, will be about 2% of the cost of the project, and potential underwriting fees could reach 1.5%, the firm’s representatives said.
“Y’all are talking about a large amount. Typically folks reduce that percentage on these larger amounts,” Thomas said.
The trio said either financing option — a bond issue or a lease-purchase agreement — has its pros and cons. A bond issue would make the county the owner of the facility, but the county’s debt limit would be affected, and the construction process would have to adhere to bid laws. A lease-purchase agreement requires no financing but a commitment to making regular payments. A nonprofit “conduit” would finance the project and would be the owner of the facility until the terms of the agreement are met. The benefit lies in the ability to bypass bid laws and it doesn’t affect the county’s credit.
Either option will require repayment that will likely come from a significant tax hike, officials have warned.
“We will look at what the current market is telling us and determine how much you can borrow,” Thomas said, noting that interest rates are still rising, and that could make a bond issue more unpalatable.
If the county opts for a lease-purchase agreement, supervisors would ask a nonprofit — most likely the Southwest Mississippi Planning and Development District — to build the facility and the county would pay the agency in installments.
Supervisor Tazwell Bowsky said he wanted more clarity on the “closing costs” for the financing, and Gazzo asked for the firm to meet again in two weeks with more solid figures on what the county’s financial commitment would be for the project. County Administrator Tami Dangerfield said another firm also wants to pitch services similar to those of Municipal Advisors of Mississippi to the board.
Supervisors would have to enter into an agreement with one of those firms to initiate the financial analysis then proceed with either the bond issue or the lease-purchase agreement to trigger the project — if finances permit.
“It costs us nothing unless we actually do the project,” Supervisor Robert Accardo noted.
“Just to be clear, we’re exploring,” Gazzo said. “We’ve got to see if we can do this project. It’s one of those things we’ve definitely got to look at and each one of us takes it seriously. We’re exploring it and the first step is with a financial adviser.”
