County agrees to $2 million QZAB loan

The Alleghany County Board of Commissioners agreed to move forward with a $2 million loan for financing school repairs at their meeting on Monday. The move to approve Qualified Zone Academy Bonds (QZAB) loan funds came on the heels of an earlier revelation that the county most likely will be required to pay interest on the loan funds. QZAB loans were set up by the federal government as an interest free options for localities to get loans to finance school repairs. Banks, in return, were granted federal tax credits. However, changes to the credits made the deal less lucrative for banks and most banks nationwide stopped issuing the loans.

The county subsequently located LaSalle Bank of Chicago, which is offering to issue a QZAB loan, provided that the county is willing to pay interest in the estimated amount of 1.5 percent. County Manager Don Adams earlier had told the board that the interest would either increase the payment (the county had planned to spend $146,000 per year) or decrease the loan amount. After a brief discussion, the commissioners agreed Monday to borrow the full $2 million.

However, a second option for the loan could be realized if another bank agrees to compete for the county's business. Adams said BB&T had expressed an interest in looking into the matter.

In other action on the matter, the county agreed to hire Sanford Holshouser Law Firm of Cary to serve as bond attorneys for the transaction at a cost of $6,500. Adams said that the Chicago bank does not furnish necessary documents to complete the transaction.

The county also will need to acquire the deed to one of the schools to use for collateral on the loan, Adams said, noting that the school system has yet to tell him which school will be used.

Under the plan, the school will then be leased back to the school system after it is signed over to the county. "The attorney would review all the financing documents, too," Adams pointed out. Commissioner J. Warren Taylor asked, "Would we still have to hire a bond attorney if we went with BB&T?" Adams responded, "I think so." In response to a question from Taylor, Adams said the county worked with the firm before on the library and an earlier school referendum. The school referendum, which would have taken a middle school issue to a vote, was cancelled.

Adams said the school board has asked to close Piney Creek's gymnasium this year in February in order to have the new gym completed by the start of next school year.

Commissioner Randy Miller noted that the gym should remain open through the cold weather months and then be completed by cold weather next fall. "You need the gym when it's cold weather, not warm weather," he pointed out.

"I can ask the question," Adams said of the gym schedule. Taylor then noted that the county hadn't had a discussion on the principal amount of the loan since unexpected interest costs were being added.

 

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