County bond counsel outlines lease-rental bond plan to finance proposed jail

Bond counsel advised Owen County that the proposed jail project cannot be paid with general‑obligation bonds because it exceeds the county’s constitutional bond cap, and recommended using a building corporation and lease‑rental bonds instead.

At a presentation to the council, the counsel explained the building corporation would issue the bonds, lease the new jail to the county and receive lease payments that match debt service. Counsel said income‑tax revenue is the planned repayment stream and property tax would remain only a limited backup “if you somehow fail to be able to collect sufficient income tax.” He said a petition of at least 50 taxpayers is required to kick off a lease‑rental process and that local legal counsel typically handles that step.

The counsel urged the council to pursue three tracks in parallel: engineering and cost estimation, financing and bond marketing. He said the county’s engineers are expected to deliver a guaranteed maximum price (GMP) by January and estimated the bond sale and closing could deliver cash approximately one month after GMP is final. The underwriter named for the sale is Stifel, which counsel said would market the bonds broadly.

On pricing, counsel used example rates of roughly 4.05–4.6 percent for comparable structures and said interest rates could be modestly lower if additional rate cuts occur before a February sale. He described the option of buying bond insurance to raise the credit rating and lower interest costs, noting the insurance provider would step in to pay bondholders only if the issuer defaulted and the insurer would then seek repayment from the county.

Council members asked about legal and calendar risks. Counsel warned that pending or future changes in state legislation could require reanalysis if they occur before bonds are sold; once bonds are sold, terms are fixed. He also cautioned that a recession or weaker income tax collections could stress the repayment model, although current projections showed a “reasonable expectation” that income‑tax receipts would cover debt service without levying property taxes.

Counsel summarized the steps the county will follow: finalize engineering to produce a GMP, revise financing documents, publish a preliminary official statement, market the bonds, and close — a sequence that, if on schedule, would allow the county access to cash in February. He emphasized the building corporation structure as the legislature’s vehicle to allow large infrastructure financing without breaching the general‑obligation bond cap.

The presentation concluded with procedural reminders — naming the building corporation’s board, publishing public‑hearing notices on the lease and bond issuance, and coordinating county appropriations at the same meeting where borrowing is approved so the county is not borrowing money it has not appropriated.

The council did not take a final financing vote at the meeting; bond counsel’s recommendations will be revisited after the January GMP and further legal documentation.