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Gainesville makes plans to finance old county jail
City agreed in June to purchase Main Street facility
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Gainesville officials moved forward Thursday on a search for financing that will allow them to control the destiny of the old Hall County Jail on Main Street.

City officials plan to sell bonds to help them finance a $7.2 million purchase of the jail from the Hall County government next month.

What they don’t know yet is the kind of interest rate that will be attached to the new debt.

In a decision at a called City Council meeting Thursday, council members agreed that the interest rate for the bond should not exceed 4 percent.

That’s a higher percentage than what most government bonds go for these days; another bond council members moved to refinance Thursday is expected to come in with an interest rate of 2.25 to 2.5 percent.

But because the jail on Main Street is currently leased by a private, for-profit company, the bonds the city will sell to buy the property won’t likely get the normal government tax-free interest rate other city debt may receive, said Dianne McNabb, a consultant for the city.

“The IRS ... doesn’t like the benefit of low tax-exempt interest rates to go to private
companies,” said McNabb, who is the director of Public Financial Management Inc.

The final interest rate won’t be known until the city takes the bonds to market on Sept. 13.
Still, 4 percent interest is “a good deal compared with five years ago what we could get,” said Gainesville’s director of administrative services, Melody Marlowe.

Hall County agreed to sell the jail property to Gainesville in June after months of negotiating with the city and a private company, Corrections Corp. of America, which houses detainees for Immigration and Customs Enforcement in the facility.

Under the new deal, CCA, the current occupant who previously leased from the county, will continue to lease the facility from the city, operating it as the North Georgia Detention Center. Hall County Sheriff’s Office administration, also located in the building, will remain there until 2017.

But the purchase is seen by city officials as a way to take control of its destiny in plans to redevelop the midtown area of Gainesville.

Already, the city is constructing a greenway through the area and has a special tax district set up to spur redevelopment projects.

City officials saw the jail as an impediment to realizing other plans for commercial investment.

One other unknown with the bond issue is how long the city may hold the debt and how it might repay it.

As long as CCA continues to operate in Gainesville, expected to be for the next seven years, its lease payments will help repay the city’s bonds.

Whether or not that happens, Gainesville Mayor Danny Dunagan said Thursday, hinges on the November election cycle. At Thursday’s meeting, Councilman Bob Hamrick also said he believed immigration policy may change before the seven-year period is up, which will affect the company’s business in Gainesville.

But McNabb said if CCA moves out of the jail before the city can pay the bonds off, then the city could refinance and get a lower, tax-exempt interest rate.

“If we had tax-exempt bonds, you would be talking 2.5 percent (interest),” McNabb said.

What’s still to be determined is whether that time period to “call” the bond would be in five or seven years. McNabb initially discussed a seven-year period. But after the discussion of changes in immigration policy, council members advised McNabb and Marlowe to look at a shorter time frame — five years.

Marlowe said city officials will know more next week on whether they can shorten that time frame. The shorter time frame will likely mean higher costs.

“We will have to see what we will have to pay to lower that refunding period,” Marlowe said. “That will cost something in interest to go from seven years to five years. As we get closer to the sale date, we can put more of a dollar amount on it.”

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