Payson council reviews Holman Capital direct-lending proposal to address $19 million PSPRS liability
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Summary
At its April 8 meeting, Payson officials heard a detailed proposal from Holman Capital to advance about $19 million to pay down the town's PSPRS retirement liability; council asked staff for comparative analysis with bond financing and asked a bond specialist to present at the next meeting.
Payson Town Council on April 8 heard a detailed pitch from Holman Capital on a direct-lending loan that Holman says could advance roughly $19 million to pay down the town's liability to the Arizona PSPRS retirement system and reduce the town's future annual pension bill.
Lance Holman (Holman Capital) described a ground-lease and lease-back structure in which the firm would advance the funds secured by an insured leasehold interest in public assets. "We would look at this fire station, confirm that it has an insured value of at least $19,000,000 and then we would enter into a ground lease and we would lease that ground from the town," Holman said. He outlined payment schedules over 10, 15 or 20 years, explained an exit/prepayment premium and said Holman's fees are a flat $20,000 rather than the large percentage fees common to bond issues.
Town Manager Caldwell briefed the council on the town's current pension burden and cash constraints: "This year, our payment to PSPRS is just over $5,000,000," he said, noting the town has been making extra payments in recent years but still carries roughly $19 million in unfunded liability. Councilors pressed Holman and staff on key tradeoffs: the effect of using —essential purpose' assets as leasehold collateral, the prepayment premium when rates fall, comparative overall cost vs. issuing bonds and the ability to make extra principal payments.
Council members asked the manager and finance staff to produce a side-by-side comparison with a conventional bond transaction. Several councilors said they want a formal bond presentation next meeting to compare all costs and timelines. Dave Christian, the town's new director of finance, and staff agreed to produce detailed cash-flow scenarios so the council can evaluate a ten-year option that some councilors signaled they prefer.
No formal vote was taken to adopt financing at the April 8 meeting. Instead, the council instructed staff to return with a detailed comparison of the Holman proposal and bond financing options and asked the town manager to arrange a bond presentation at a future meeting.
Why it matters: Payson's PSPRS bill is a substantial recurring drain on the general fund. Council members framed the discussion as an opportunity to reduce long-term cost and accelerate payoff schedules, but they also sought greater clarity about risks of leasing public assets and about the net savings after fees and any prepayment charges.
What's next: Staff will present comparative figures and host a bond specialist at an upcoming meeting; the council may then take formal action on a financing vehicle.
