Dothan approves $55.8 million city hall contract, authorizes public building authority financing

The Dothan City Commission on May 6 approved transferring property to the city's Public Building Authority, authorized a lease and loan arrangement to finance a new city hall and annex and awarded a construction contract for the city hall. The commission approved a quitclaim deed to the Public Building Authority, a lease/indenture and an agency agreement to allow the authority to own and manage the project and authorized city staff to act as agent for the project.

The financing package discussed by the commission includes an approximately $68,000,000 loan to cover the city hall and annex projects. Marcy Lewis, financial adviser with PFM Financial Advisors, told commissioners the city secured a 20-year loan from a bank at a 3.92% fixed interest rate and that the structure produced substantial estimated savings. "We ended up with an interest rate of 3.92%, which we think is 40 to 50 basis points better than had we gone to the bond market," Lewis said. She said that, by the firm's estimates, the rate saved the city about $3.5 million to $4 million in debt service over the 20-year term and reduced issuance costs.

The commission also voted to award the construction contract for the city hall to Brasco Midori LLC for a not-to-exceed amount of $55,846,576 and issued a notice to proceed. City staff said construction for the city hall is expected to begin in June with an 18-month schedule; the annex remains under design and will return to the commission for separate approval once pricing is finalized.

Rod Cantor, bond counsel with Bradley Arant, described the financing structure as common for projects using authorities but said it is rare for a bank to lend under this structure for 20 years at a fixed rate. "None of my partners have seen any lender loan for 20 years at a fixed rate under a structure like this," Cantor said, and credited the city's financial management for enabling the favorable terms.

The commission also reappointed a board member to the Public Building Authority at the meeting and noted the Public Building Authority had met earlier in the day to approve related documents. Commissioners voted unanimously on the ordinances and the contract award.

Clarifying details: the loan amount was described as "approximately $68,000,000" by staff; the awarded construction contract was recorded in the meeting as not to exceed $55,846,576; the staff-estimated fixed interest rate was 3.92% and estimated savings were described as about $3.5 million to $4 million over 20 years. Construction start was described as June with an 18-month schedule for the city hall alone.