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County mulling its jail gap funding options

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Will need to borrow $3 million to help pay for construction costs of the facility


County leaders are eager to get started on building a new jail, a project made possible by the passage of a bond measure in November.

However, the $10 million bond does not cover the entire cost of the $17 million project. Crook County recently transferred $3 million of reserve funds toward the project, and the City of Prineville is providing another $1 million of in-kind services, but that still leaves a $3 million gap to fill. Consequently, county officials have begun investigating gap funding options.

"Several months ago, the county entered into a contract with Piper Jaffray to perform financial consulting services to assist the county in acquiring the money from the bond," said County Counsel Jeff Wilson. "They are also going to assist us in obtaining gap financing."

This past week, John Peterson, who represents the firm, came to the county with three potential options for obtaining the necessary $3 million. One is to obtain a loan from a commercial bank, but the other two options involve use of either a federal or state program.

"The second (option) is a loan from USDA (United States Department of Agriculture)," Wilson said. "The advantage of a USDA loan, as I understand it, is that those loans are made available to governmental entities at a lower interest rate and for longer terms."

The county could pay off the loan over a 40-year period of time, borrow at a fixed interest rate, and not face any prepayment penalties.

Despite those benefits, there are some factors that make the USDA option less attractive.

"Some of the issues with USDA is that it's a reimbursement obligation," Wilson said. "What that means is that the money only becomes available to the county after the project is complete. Because of that, when you borrow money from USDA, you have to arrange for what is called interim financing, financing that allows you to complete the project so that you can finalize the loan with USDA once the project is completed."

The USDA loan also requires the county complete an environmental analysis of the jail location in downtown Prineville and conduct a feasibility test of the project.

"We have already done a lot of that, when we did the feasibility (study) of placing the jail at (Pioneer Memorial) Hospital," Wilson said.

A third option is to obtain a loan through Business Oregon, a state program that is funded through lottery dollars. Unlike the USDA loan, the county would not have to conduct an environmental or feasibility study, and interim financing would not be necessary.

However, Wilson points out that the duration allowed for repayment is likely limited to 20 or 25 years, and the interest rate is likely higher.

The county court is currently waiting for Peterson to complete a report on the three options and make a recommendation at a future court meeting.

"The county court will then have to make a decision," Wilson said.